Textron's Growth Strategy Impresses, Bell Segment A Concern

On Sep 5, 2016, we updated a research report on Textron Inc. (NYSE:TXT) , a global multi-industry company that manufactures aircraft, automotive engine components and industrial tools.

Textron’s geographically diverse network of aircraft, defense & intelligence, industrial and financial ventures negates any specific business risk. The company is known globally for its valuable brand names, such as Bell Helicopter, Cessna Aircraft Company, Jacobsen, Kautex, E-Z-GO and Greenlee. It has a strong presence in areas like business jets and other general aviation aircraft, helicopter, aircraft engines, golf carts, turf maintenance equipment, electronic test equipment and blow-molded fuel tanks.

Recently, the company's board of directors gavethe green signal to a plan aimed at restructuring and realigning the company’s businesses. The initiative aims atimprovingoperating efficiency across Textron. The restructuring is expected to be completed by Mar 2017. The Textron Systems and Industrial segments will undergo maximum changes. Post restructuring, Textron expects to incur certain costs and charges thatwill affect its financials going forward.

On the flip side, Textron anticipates flattish growth at Bell Helicopter. Soft V-22 Osprey shipments and weakness in the global commercial helicopter market are expected to affect segment revenues and dampen the top line in 2016. Revenues at Bell are expected to suffer as these shipments slow down in 2016. The company expects commercial deliveries to continue declining in the second half compared to projections at the beginning of the year, as the commercial helicopter market remains challenged, especially in the medium segment.

Moreover, budget deficits and political uncertainty make future defense budgets vulnerable to cutbacks, affecting the fortune of the company. Although the defense spending is recovering from previous deficits, the company’s performance is likely to be affected, owing to tepid economy.

TEXTRON INC Price and Consensus

Textron currently has a Zacks Rank #3 (Hold).

Stocks to Consider

Some better-ranked stocks in the aerospace and defense sector include Engility Holdings, Inc. (NYSE:EGL) , General Dynamics Corporation (NYSE:GD) and Leidos Holdings, Inc. (NYSE:LDOS) . While Engility Holdings sports a Zacks Rank #1 (Strong Buy), both General Dynamics and Leidos carry a Zacks Rank #2 (Buy).

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