Textron Specialized Vehicles, Textron Inc.’s (TXT) subsidiary, has acquired the Douglas Equipment business from Curtiss-Wright Flow Control (UK) Ltd., a subsidiary of Curtiss-Wright Corp. (CW).
UK-based Douglas Equipment supplies ground support equipment (“GSE”) to airline companies. Post acquisition, it will become part of the Textron Specialized Vehicles group and will continue to manufacture from its facilities in the UK.
Textron Specialized Vehicles specializes in miscellaneous industrial products such as golf carts, utility vehicles and ground support equipment. The unit manufactures and sells its products under different brands namely E-Z-GO, Cushman, Bad Boy Buggies and TUG.
Management expects the acquisition of Douglas Equipment to complement its TUG brand. TUG manufactures ground support equipment for airlines, air-freight companies, ground handlers, government agencies and airports. Douglas equipment’s specialization in conventional aircraft tractors and runway friction measuring devices will strengthen Textron’s position as the ground support equipment manufacturer. This will help Textron to expand its product portfolio and cater to a larger customer base.
The acquisition did not come as a surprise given Textron’s history of following the inorganic path to strengthen its business. Textron has acquired assets in the same line of business to expand GSE product offerings. Textron had acquired TUG Technologies Corp. in May 2014 to expand its operation in the aviation GSE market.
Per a report from The Boeing Company (BA), air and cargo traffic are expected to annually rise 5% and 4.7%, respectively, in the next two decades. Boeing’s long-term outlook in the commercial space indicates that demand for commercial aircraft will more than double in 2033 from 2013 levels. This boom will also lead to higher demand for ground support equipments. Textron’s initiative to strengthen its GSE business in this context is appreciable.
Textron has beaten earnings estimates in three of the last four quarters, delivering an average beat of 10.27%, buoyed by its acquisitions. Textron’s inorganic growth strategy will likely contribute to higher earnings, going forward.
Textron currently has a Zacks Rank #3 (Hold). A better-ranked stock in the same sector is General Dynamics Corp. (GD) which carries a Zacks Rank #2 (Buy).
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