Diversified U.S. conglomerate,Textron Inc. (TXT) announced first quarter 2011 operating earnings of 10 cents per share versus a loss of a penny in the year-ago quarter. The first quarterly result however came below the Zacks Consensus Estimate of 17 cents by 7 cents.
Performance in the reported quarter was affected by flat production and delivery level at its Cessna segment. On a reported basis, Textron reported quarterly earnings of 9 cents per share, versus a loss of 3 cents recorded in the year-ago quarter.
Operating Statistics
Textron clocked quarterly revenue of approximately $2.5 billion which came in line with the Zacks Consensus Estimate and soundly beat year-ago quarterly revenue of $2.2 billion. The year-over-year quarterly upward spike in revenue is attributable to higher performance from all of its manufacturing business segments barring Textron Systems. The performance of the Financial division was however lower than the year-ago quarter.
Overall, in the reported quarter, the company registered an operating income of $31 million versus an operating loss of $4 million in the year-ago quarter. Net income came in at $29 million versus a net loss of $8 million in the year-ago quarter.
Segmental Revenue
Cessna: Revenue from this division during the first quarter increased $123 million year over year to $556 million. The rise was due to a higher mix of light to mid-sized new jets and higher used jet deliveries. In the reported quarter the company delivered 31 Citation jets, flat with deliveries in the year-ago quarter.
Segment loss increased $14 million year over year to $38 million. This was due to lower deposit forfeiture income on account of fewer order cancellations, higher engineering cum development costs and inflation. Quarterly backlog at the end of the reported quarter was $2.6 billion, down $293 million from the end of fiscal 2010.
Bell: Revenue from this division during the first quarter increased $131 million to $749 million. The year-over-year growth was due to higher revenues generated through deliveries of V-22 and H-1 deliveries to the government. Bell delivered 9 V-22’s and 4 H-1’s in the reported quarter compared with 4 V-22’s and 3 H-1’s in the year-ago quarter.
Bell delivered 15 commercial aircraft in the quarter, flat with deliveries in the first quarter of 2010. Segmental profit increased $17 million to $91 million, primarily due to the impact of higher military production and deliveries more than offset increased research and development costs. Quarterly backlog at the end of the reported quarter was $7.3 billion, up $119 million from the end of fiscal 2010.
Textron Systems: Revenue from this division during the reported quarter decreased $13 million to $445 million. The downside in revenue was mainly due to lower armored security vehicle aftermarket services revenue. Segmental profit decreased $2 million to $53 million primarily due to lower revenues. Quarterly backlog at the end of the reported quarter was $1.6 billion, flat versus the end of fiscal 2010.
Industrial: Revenue from this division increased $78 million during the quarter to $703 million from $625 million in the year-ago quarter. The result benefited from higher volumes at Kautex, Greenlee and Jacobsen. This resulted in segmental profit rising by $12 million to $61 million.
Finance: Revenue from this division decreased $50 million year over year to $26 million. The decline in revenue was primarily due to reduced earnings on lower finance receivables.
However, the company was able to reduce segmental losses by $14 million and digested a quarterly loss of $44 million. This was primarily due to lower loan loss provisions and lower operating expenses. This was partially offset by lower interest margin on the reduced portfolio of finance receivables and higher portfolio losses.
Financial Condition
Textron ended the reported quarter with cash and cash equivalents of approximately $986 million, compared with $898 million at the end of fiscal 2010. The company generated $55 million of cash from operations in the reported quarter, compared with $89 million used in the year-ago quarter.
Capital expenditure during the quarter was $78 million versus $38 million in the year ago quarter. Long-term debt remained at the same level of $2.3 billion at the end of the reported quarter versus fiscal-end 2010. However Textron’s total debt was $4.7 billion, down $352 million from the end of fiscal 2010.
Guidance
Textron, driven by the bullishness of its top-line growth prospects across its manufacturing segments, has reaffirmed its fiscal 2011 EPS from continuing operations in the range of $1.00 – $1.15.
Our Take
Based in Providence, the Rhode Island, Textron Inc. is a global multi-industry company that manufactures aircraft, automotive engine components and industrial tools.
Textron currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. Considering the fundamentals, we are maintaining our Neutral recommendation on the stock. In the near term, we would advise investors to focus on the Zacks #1 Rank (short-term Strong Buy rating) diversified conglomerate peers like Hutchison Whampoa Limited (HUWHY) and LSB Industries Inc. (LXU).
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