CLC Clarcor Inc. (delisted)

Diversified U.S. conglomerate,Textron Inc. (TXT) announced second quarter 2011 earnings of 29 cents per share in line with the year-ago quarter. The second quarterly result also exceeded the Zacks Consensus Estimate of 24 cents by 5 cents.

However, after including a restructuring charge, income from continuing operations came in at 27 cents in the year-ago quarter versus no special items in the reported quarter. Performance in the reported quarter was boosted by higher aftermarket volumes at its Cessna unit, along with improvement in the cost structures at its Bell and Industrial units.

Operating Statistics

Textron clocked quarterly revenues of approximately $2.7 billion which came in below the Zacks Consensus Estimate of $2.8 billion by $82 million. However revenues marginally beat the year-ago quarterly revenues by $19 million. The year-over-year stalemate in revenues is mainly attributable to lower revenue in the Textron Systems division on account of lower unmanned aircraft system sales and lower mission support volume. The performance of the Financial division was also lower than the year-ago quarter. This offset the higher topline from Cessna, Bell and Industrial segments.

Overall in the quarter, the company reported income of $92 million from continuing operations versus $81 million in the year-ago quarter. Net income came in at $90 million versus $82 million in the year-ago quarter.

Segmental Revenues

Cessna: Revenues from this division during the reported quarter increased $17 million year-over-year to $652 million. The rise was due to growth mainly in the aftermarket business. In the reported quarter the company delivered 38 Citation jets, compared with 43 deliveries in the year-ago quarter. Segment profit increased $2 million year-over-year to $5 million. Quarterly backlog at the end of the reported quarter was $2.5 billion, down $113 million from the end of the first quarter of 2011.

Bell: Revenues from this division during the reported quarter increased $49 million to $872 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, 8 H-1's and 22 commercial aircraft in the quarter compared to 8 V-22's, 3 H-1's and 21 commercial units in the year-ago quarter. Segmental profit increased $12 million to $120 million, reflecting improved performance. Quarterly backlog at the end of the reported quarter was $7.0 billion, down $365 million from the end of the first quarter of 2011.

Textron Systems: Revenues from this division during the reported quarter decreased $82 million to $452 million. The downside in revenues was mainly due to lower unmanned aircraft system sales and lower mission support volume. Segmental profit decreased $21 million to $49 million primarily due to lower volumes. Quarterly backlog at the end of the reported quarter was $1.6 billion, down $60 million from the end of the first quarter of 2011.

Industrial: Revenues from this division increased $58 million during the quarter to $719 million from $661 million in the year-ago quarter. The result benefited primarily due to a favorable foreign exchange impact. This resulted in the segmental profit rising by $4 million to $55 million.

Finance: Revenues from this division decreased $23 million year over year to $33 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 $38 million and digested a quarterly loss of $33 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 $610 million, compared to $898 million at the end of fiscal 2010. The company generated $164 million of cash from operations in the reported quarter, compared to $339 million used in the year-ago quarter. Capital expenditure during the quarter was $91 million versus $45 million in the year ago quarter. Long term debt fell to $2.2 billion at the end of the reported quarter versus $2.3 billion at fiscal-end 2010. However Textron's total debt was $4.4 billion, down $288 million from the end of the first quarter of 2011.

Guidance

Textron, driven by the bullishness of its top line growth prospects across its manufacturing segments, has reaffirmed its fiscal 2011 EPS from continuing operations in the range of $1.00 – $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 #3 Rank, which translates into a short-term Hold rating. Considering the fundamentals, we are maintaining our Neutral recommendation on the stock. In the near-term, we would advise investors to focus on the Zacks #1 Rank (short-term Strong Buy rating) diversified conglomerate peers like Danaher Corporation (DHR) and CLARCOR Inc. (CLC).

 
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