Textron Inc. (NYSE: TXT) reported first-quarter adjusted earnings of $1.45 per share, exceeding analyst expectations by more than 11 percent, and announced its intention to separate its industrial businesses to focus on aerospace and defense.
"It's the right answer for both of our A&D and industrial businesses at this moment in time, and it provides clarity and simplification on our capital allocation and investments," Chief Executive Officer Lisa Atherton said on the earnings call.
The maker of Cessna jets and Bell helicopters saw its revenue climb 12 percent from a year ago to $3.7 billion, beating the consensus estimate of $3.52 billion. The strong results were powered by a 22 percent revenue jump at Textron Aviation and a 13 percent increase at Textron Systems.
The planned separation will create a pure-play aerospace and defense company with an estimated $12 billion in revenue and a $19.2 billion backlog, which is entirely related to the A&D businesses. Management is targeting a completion of the separation within 12 to 18 months.
Strategic Separation
Textron will explore multiple paths for the separation, including an outright sale of the industrial businesses or a tax-free spin-off to shareholders. The Industrial segment, which includes Kautex automotive parts and Textron Specialized Vehicles like E-Z-GO golf carts, generated over $3 billion in revenue. Atherton noted the move was timed as both the A&D and industrial businesses are now "well positioned for the future."
The new, more focused Textron will consist of Textron Aviation, Bell, and Textron Systems. "This separation also enhances clarity around our capital allocation and investments as well as our strategic flexibility," Atherton said, pointing to accelerated investment in the MV-75 Cheyenne military aircraft program.
Segment Performance
Textron Aviation, the largest segment, delivered revenue of $1.5 billion, a 22 percent increase year-over-year, on higher aircraft volume and a 10 percent rise in aftermarket revenue. The unit delivered 37 jets and 35 commercial turboprops in the quarter. Bell revenues grew 9 percent to $1.1 billion, driven by 25 percent growth in military revenue from the MV-75 program.
The strong quarter signals continued robust demand for private aircraft and military hardware. The focus now shifts to execution on the planned corporate separation and key defense programs, with a decision on the Army's Flight School Next competition expected later this summer.
This article is for informational purposes only and does not constitute investment advice.
