Why Textron (TXT) Is Gaining Today

Tickers in this article: TXT

NEW YORK (TheStreet) -- Textron shares gained 6.5% to reach $38.46 Wednesday following a positive earnings report.

The aerospace conglomerate reported earnings of 59 cents a share in the fourth quarter, which matches the Capital IQ consensus of 59 cents. Textron beat the consensus revenue estimates, reporting a 4.3% increase year over year to $3.51 billion compared to the consensus of $3.44 billion for the quarter.

Textron also issued guidance for 2014 that comes close to Capital IQ consensus. The conglomerate expects 2014 earnings between $2 and $2.20, compared to the consensus estimate of $2.20 a share. Textron expects revenue of about $13.2 billion in 2014. The consensus estimate calls for revenue of $13.23 billion.

Projections for 2014 do not include Textron's acquisition of Beechcraft, which is expected to close in the first half of 2014.

TheStreet Ratings team rates TEXTRON INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate TEXTRON INC (TXT) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its solid stock price performance, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The debt-to-equity ratio is somewhat low, currently at 0.92, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels.
  • Compared to its closing price of one year ago, TXT's share price has jumped by 35.60%, exceeding the performance of the broader market during that same time frame. Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year.
  • TXT, with its decline in revenue, underperformed when compared the industry average of 9.6%. Since the same quarter one year prior, revenues slightly dropped by 3.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. In comparison to the other companies in the Aerospace & Defense industry and the overall market, TEXTRON INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • TEXTRON INC's earnings per share declined by 27.1% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, TEXTRON INC increased its bottom line by earning $1.97 versus $0.78 in the prior year. For the next year, the market is expecting a contraction of 11.7% in earnings ($1.74 versus $1.97).