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Textron Inc TXT

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Morningstar’s Analysis

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Textron Reports Strong Commercial Growth in Second Quarter; Military Relatively Stagnant

Burkett Huey, CFA Equity Analyst

Analyst Note

| Burkett Huey, CFA |

No-moat rated Textron reported solid second-quarter results as activity continues to rebound in its end markets. Sales for the quarter were about $3.2 billion, up 29% year over year and in line with second-quarter 2019. Textron posted earnings per share of $0.81, ahead of our expectations and FactSet Conesus. Deliveries were solid across the board as commercial demand was able to offset relatively stagnant military demand. While we are encouraged by commercial growth, we are unconvinced that this will continue in the long run. That said, we maintain our fair value estimate of $42. This would have been raised about $1 to reflect an increase in our near-term revenue and margin assumptions, but it is offset due to the impact of Morningstar's probability-adjusted U.S. corporate tax rate of 26% beginning in 2022. With shares trading around 55% above our fair value, they still look quite overvalued to us. 

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Company Profile

Business Description

Textron is a conglomerate that designs, manufactures, and services specialty aircraft for various end markets, but it also has several unrelated businesses. The firm’s aviation segment manufactures and services Cessna and Beechcraft business aircraft. Bell is a helicopter manufacturer and servicer for both the commercial and military end market. Textron Systems produces uncrewed aircraft and armored vehicles for the military market as well as aircraft simulators for the commercial and military end markets. Textron Industrial contains a Kautex business that manufactures plastic fuel tanks for conventional and hybrid motor vehicles and produces specialized vehicles such as golf carts, snowmobiles, all-terrain vehicles, and others.

40 Westminster Street
Providence, RI, 02903
T +1 401 421-2800
Sector Industrials
Industry Aerospace & Defense
Most Recent Earnings Jun 30, 2021
Fiscal Year End Jan 4, 2021
Stock Type Cyclical
Employees 33,000