Diversified U.S. conglomerate,Textron Inc. (TXT) announced third quarter 2011 adjusted earnings of 45 cents per share, handsomely beating the Zacks Consensus Estimate of 31 cents. The quarterly result also exceeded year-ago earnings of 13 cents.
The sharp rise in earnings year-over-year was due to higher revenues from the resurgence in demand for corporate jets and the absence of last year's non-recurring charges. Last year’s performance was affected by a 25-cent non-cash charge associated with Textron Financial’s asset liquidation in Canada and 5 cents in charges related to restructuring activities across Textron.
On a reported basis, the company reported earnings of 47 cents in the reported quarter versus a loss of 17 cents in the year-ago quarter. In the reported quarter the 2-cent variance between reported and adjusted earnings was due to discontinued operations.
Operating Statistics
Textron clocked quarterly revenues of approximately $2.8 billion which came in line with the Zacks Consensus Estimate. Revenues also beat the year-ago quarterly revenues of $2.5 billion by 13.5%. The year-over-year rise in revenues is mainly attributable to higher topline in the Cessna Division.
In the reported quarter barring Finance segment all the other segments witnessed higher revenues. Overall in the reported quarter, the company clocked an income of $136 million from continuing operations versus loss of $48 million in the year-ago quarter. Net income came in at $142 million versus a net loss of $48 million in the year-ago quarter.
Segmental Revenues
Cessna: Revenues during the reported quarter increased $236 million year-over-year to $771 million. The rise was due to higher jet volume. In the reported quarter the company delivered 47 Citation jets, compared with 26 deliveries in the year-ago quarter.
Segment profit increased $64 million year-over-year, primarily due to higher volume, mix and favorable performance. Quarterly backlog at the end of the reported quarter was $2.2 billion, down $359 million from the end of the second quarter of 2011.
Bell: Revenues from this division during the reported quarter increased $69 million to $894 million. The year-over-year growth was due to higher revenues generated by increasing deliveries of V-22, H-1 and commercial aircraft. Bell delivered 9 V-22's, 7 H-1's and 26 commercial aircraft in the quarter compared to 7 V-22's, 5 H-1's and 24 commercial units in the year-ago quarter.
Segmental profit increased $36 million to $143 million, reflecting improved performance. Quarterly backlog at the end of the reported quarter was $6.4 billion, down $588 million from the end of the second quarter of 2011.
Textron Systems: Revenues from this division during the reported quarter increased $2 million to $462 million. The marginal rise in revenues was mainly due to flat volumes.
Segmental profit decreased $3 million to $47 million. Quarterly backlog at the end of the reported quarter was $1.5 billion, flat versus the second quarter of 2011.
Industrial: Revenues from this division increased $55 million during the quarter to $655 million from $600 million in the year-ago quarter. The result benefited primarily due to a favorable foreign exchange impact and higher volumes. Segmental profit was flat at $37 million year-over-year.
Finance: Revenues from this division decreased $27 million year over year to $32 million. The decline in revenues was primarily due to reduced earnings on lower finance receivables. However the company was able to reduce segmental losses by $27 million and digested a quarterly loss of $24 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.
Financial Condition
Textron ended the reported quarter with cash and cash equivalents of approximately $1.5 billion, compared to $898 million at the end of fiscal 2010. The company generated $444 million of cash from operations in the reported quarter, compared to $517 million generated in the year-ago quarter.
Capital expenditure during the quarter was $102 million versus $51 million in the year ago quarter. Long-term debt rose to $2.5 billion at the end of the reported quarter versus $2.3 billion at fiscal-end 2010. Textron's consolidated net debt was $3.9 billion, down $500 million from the end of the second quarter 2011.
Guidance
Textron driven by the bullishness of its top-line growth prospects across its manufacturing segments now forecasts 2011 earnings per share from continuing operations in the range of $1.05 – $1.15.
Our Take
Based in Providence, Rhode Island, Textron Inc. is a global multi-industry company that manufactures aircraft, automotive engine components and industrial tools.
Textron currently retains a Zacks #2 Rank, which translates into a short-term Buy rating. Considering the fundamentals, we are maintaining our Neutral recommendation on the stock. This is in sync with its diversified conglomerate peers like 3M Company (MMM) and Carlisle Companies Incorporated (CSL).
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