VALUATION HIGHLIGHTS
- Textron Aviation constitutes 43% of the Trefis price estimate for Textron's stock.
- Bell constitutes 25% of the Trefis price estimate for Textron's stock.
- Industrial & eAviation constitutes 17% of the Trefis price estimate for Textron's stock.
WHAT HAS CHANGED?
TXT Stock vs. S&P 500 Performance
The changes in TXT stock over the recent years have been far from consistent. Returns for the stock were 60% in 2021, -8% in 2022, 14% in 2023, and -5% in 2024. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, 24% in 2023, and 23% in 2024 — indicating that TXT underperformed the S&P in 2023 and 2024.
Q4 2024 Performance
Textron reported manufacturing revenue of $3.6 billion in Q4 2024, reflecting a 7.2% y-o-y fall, primarily due to a 16% fall in Textron Aviation segment sales.
The company reported earnings of $1.34 per share, compared to $1.60 in the prior-year quarter. For the full year of 2025, the company expects its earnings to be between $6.00 and $6.20 per share.
Aviation Growth
Fueled by a substantial order backlog within its Aviation segment, Textron has experienced significant growth in recent years. This Aviation segment, contributing 40% to Textron's total revenues and over 45% to its total profits, is anticipated to maintain a steady growth trajectory in the near future.
In contrast, Textron's competitor, Bombardier, is a leading business jet manufacturer with a product line segmented into three brands: Learjet, Challenger, and Global. Bombardier primarily focuses on the medium and large aircraft categories, with unit costs ranging from $20 million to $75 million. Conversely, Textron Aviation primarily serves the light aircraft market, offering aircraft with unit costs generally below $30 million.
Ascend
Textron's latest jet – Citation Ascend, offers room to accommodate more passengers and is more fuel-efficient than the company's other jets. The company will begin deliveries of this new jet in 2025.
BUSINESS SUMMARY
Textron is a diversified multi-industry company involved in the design and manufacture of a wide array of products, including civilian and military helicopters, business jets, turboprop aircraft, piston-engine airplanes, golf carts, off-road and light transportation vehicles, turf care equipment, power tools, and various defense products. Additionally, Textron offers financing solutions to facilitate the sale of certain products, such as helicopters and airplanes.
Currently, Textron organizes its operations into three primary segments: Bell, which focuses on commercial and military helicopters; Textron Aviation, encompassing the Cessna and Beechcraft airplane businesses; and Textron Systems, which includes the company's defense-related products and services. The former Industrial segment, which included turf care equipment, golf carts, off-road and light transportation vehicles, and auto components, has been integrated into the current segment structure. The financing activities are now primarily managed within the respective business segments.
Textron employs a multi-channel sales strategy, selling its products directly to customers as well as through a network of independent dealers. For many of its key product lines, including Bell helicopters and Cessna and Beechcraft airplanes, the company also provides comprehensive maintenance, repair, and overhaul services.
POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE
Below are key drivers of Textron's value that present opportunities for upside or downside to the current Trefis price estimate for Textron.
- Textron Aviation EBITDA Margin: Textron Aviation demonstrated a strong improvement in profitability, with its EBITDA Margin increasing from 11% in 2019 to 15% in 2024. Our current forecast anticipates a further rise in this metric to 18% by the conclusion of our review period. However, an even more optimistic scenario, where margins could potentially exceed 26% by the end of the forecast period, suggests a potential upside of approximately 20% to Trefis price estimate for Textron's stock.
SOURCES OF VALUE
Our analysis indicates that the Textron Aviation and Bell Helicopter divisions together constitute approximately two-thirds of Textron's overall valuation.
Textron's prominent role as a general aviation aircraft manufacturer
Through its Textron Aviation segment, which encompasses the Cessna and Beechcraft brands, Textron holds a leading position as one of the world's largest manufacturers of general aviation aircraft. General aviation includes all aircraft intended for purposes other than scheduled commercial airline service or military operations. The company maintains a strong presence across all three key sub-segments of the general aviation market: piston-engine airplanes, turboprop aircraft, and business jets.
We anticipate that Textron's aircraft sales could experience growth in the coming years, driven by sustained demand for business jets, continued demand for piston-engine airplanes from flight training institutions, and increasing global requirements for agricultural turboprop aircraft.
Bell's comprehensive helicopter product portfolio
Bell Helicopter is a well-established and significant participant in the global helicopter market. The company's diverse portfolio of commercial and military helicopters positions it well to sustain its market share in the foreseeable future. In the commercial sector, a consistent demand for helicopters, including potential upticks in demand from sectors like offshore energy, could contribute to increased sales for Bell. Furthermore, Bell's extensive global sales and service network is expected to enable it to capitalize on the growing demand for helicopters in regions such as Asia-Pacific and the Middle East.
KEY TRENDS
Lower airplane shipments could hurt revenues
- With economic growth slowing down and fears of recession mean that the shipments of general aviation airplanes could face headwinds in the near term.
Rising demand for commercial helicopters and general aviation airplanes from emerging countries
- The helicopter market experienced significant challenges in 2020 due to the COVID-19 pandemic, which led to widespread grounding of aircraft fleets. However, with the subsequent recovery of the global economy in the years following, we have observed an increase in the demand for Bell helicopters.
- Furthermore, the sustained economic growth in numerous countries within the Asia-Pacific region has fueled a rising demand for commercial helicopters, business jets, and turboprop aircraft. The growth in personal and corporate incomes in this region is driving increased demand for light helicopters used for transporting business VIPs, as well as business jets for senior corporate executives.
