Textron Inc.’s (NYSE:TXT) board of directors has given a green signal to a plan of restructuring and realigning the company’s businesses. The initiative aims to improve operating efficiency across Textron.
Textron expects the restructuring to be complete by Mar 2017. The Textron Systems and Industrial segments will undergo the maximum changes.
Impact on Textron Systems
Textron plans to cease production of a sensor-fuzed weapon or cluster bomb, which has been witnessing a decline in foreign military orders. According to the company, orders are declining primarily due to difficulty in obtaining approvals from the executive branch and congress for foreign military sales and sales to direct commercial international customers amid the present political environment.
Overall, the restructuring drive will result in layoffs, consolidation of operations and asset impairments in the Weapons and Sensors operating unit. Apart from these, the Textron Systems segment will see job cuts and asset impairments as well.
Impact on the Industrial Segment
The initiative also entails the consolidation of the Jacobsen turf-maintenance brand with the Textron Specialized Vehicle business. This will result in the combination of certain facilities, general and administrative functions and job cuts.
Charges Related to Restructuring
Post restructuring, Textron expects to incur pre-tax charges in the range of $110–$140 million in the third quarter of 2016. Severance and associated costs are expected to be in the range of $40–$55 million. The company anticipates contract termination and other facility closure charges of $25–$30 million and asset impairment charges of $45–$55 million. Cash outlays for the restructuring initiative are projected to be between $65 million and $85 million in 2016.
TEXTRON INC Price
Zacks Rank & Key Picks
Textron currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the aerospace and defense space include Engility Holdings, Inc. (NYSE:EGL) , General Dynamics Corporation (NYSE:GD) and Ducommun Inc. (NYSE:DCO) . While Engility Holdings and Ducommun sport a Zacks Rank #1 (Strong Buy), General Dynamics carries a Zacks Rank #2 (Buy).
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