TXT stock has seen strong gains of 70% from levels of $50 in early January 2021 to around $85 in early October 2024, vs. an increase of about 50% for the S&P 500 over this roughly three-year period.
However, the increase in TXT stock has been far from consistent. Returns for the stock were 60% in 2021, -8% in 2022, and 14% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 — indicating that TXT underperformed the S&P in 2023.
Textron reported manufacturing revenue of $3.5 billion in Q2 2024, reflecting a 3.2% y-o-y rise, primarily driven by the Bell segment, up 13.3%, while Textron Aviation segment sales were up 8.3%.
The company reported earnings of $1.54 per share, compared to $1.46 in the prior-year quarter. For the full year of 2024, the company expects its earnings to fall between $6.20 and $6.40.
The shares of Textron are trading over 4x the levels observed during March 2020 when markets made a bottom. This growth is assisted by the strong order backlog of the Aviation segment. Notably, the Aviation segment is likely to observe steady growth in the near term. The segment contributes 40% of total revenues and over 45% of total profits.
Textron's competitor, Bombardier, is a leading manufacturer of business jets with its product portfolio segregated across three brands — Learjet, Challenger, and Global. Bombardier primarily sells medium and large aircraft, with unit costs ranging from $20 million to $75 million. On the contrary, Textron caters to the light aircraft market with unit costs lower than $30 million.
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.
Textron is a multi-industry company that designs and manufactures 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 a variety of defense products. The company also provides financing to promote sales of some of its products, including helicopters and airplanes.
Textron conducts its business through five operating segments: Bell commercial and military helicopters, Textron Aviation (which includes Cessna and Beechcraft airplanes' business), Textron Systems (which includes the company's defense system business), Industrial (which includes the company's turf care equipment, golf carts, off-road and light transportation vehicles, and auto component business), and Finance (which provides financing to purchasers of Textron products).
The company sells its products directly as well as through a network of independent dealers. For many of its product lines, including Bell helicopters and Cessna and Beechcraft airplanes, the company also provides maintenance, repair, and overhaul services.
Below are key drivers of Textron's value that present opportunities for upside or downside to the current Trefis price estimate for Textron.
The Textron Aviation and Bell Helicopter divisions together account for approximately two-thirds of Textron's valuation, as per our estimate.
Through its Textron Aviation segment, which includes Cessna and Beechcraft airplanes, Textron is one of the largest general aviation airplane makers in the world. General aviation airplanes include all airplanes not meant for scheduled commercial service or military purposes. The company has a strong presence in all three sub-segments of the general aviation market: piston-engine airplanes, turboprops, and business jets.
We believe with a recovery in demand for business jets, higher demand for piston-engine airplanes from pilot schools, and rising global demand for agricultural turboprop aircraft, Textron could see its airplane sales rise in coming years.
Bell Helicopters is a well-established player in the global helicopter market. The company's portfolio has many commercial and military helicopters, which will help it maintain its market share in the coming years. In the commercial space, with demand for helicopters from the offshore oil & gas sector rising, Bell's sales could rise. At the same time, Bell's global sales and service network will also help it gain from the rising demand for helicopters from Asia-Pacific and the Middle-East regions.
