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Will Bell Segment Propel Textron's (TXT) Earnings in Q1?

Zacks Equity Research

Textron Inc. TXT is scheduled to report first-quarter 2020 results on Apr 30, before market open.

The company’s earnings have surpassed the Zacks Consensus Estimate in the trailing four quarters by 8.13%, on average.

Textron’s Bell Segment’s improved performance is likely to have boosted results in the soon-to-be-reported quarter.

Let’s see how things are shaping up prior to this announcement.

The Bell Segment: A Key Catalyst

The Bell segment has been witnessing strong demand in its commercial business for the past couple of quarters. We expect a similar trend to have contributed to this unit’s first-quarter performance as well. To this end, it is imperative to mention that Textron’s management earlier announced expectations of witnessing a strong performance for the Bell segment in 2020, primarily led by higher military aftermarket and commercial volumes.

Notably, the Zacks Consensus Estimate for the segment’s first-quarter revenues stands at $769 million, implying a 4.1% improvement from the prior-year quarter’s $739 million.

Other Factors to Note

Toward the end of December 2019, an accident had taken place at Textron's Wichita Plant 3 facility. Although there were no disruptions from an operational standpoint, the plant however incurred significant damages, affecting the company's composite manufacturing operations. As a result, production was hampered and deliveries are expected to decline during the first half of 2020. This is likely to have weighed on the company’s top line in the first quarter.

The Zacks Consensus Estimate for first-quarter sales stands at $2.89 billion, suggesting a decline of 6.9% from the figure reported in the prior-year quarter.

During the first quarter, Textron acquired Premiair Aviation with its three locations in Australia, thus expanding the reach of aftermarket services to the Asia-Pacific region. The expansion, which might boost the company’s revenues over the long run, is likely to have shot up expenses during the quarter under review. This, in turn, is likely to have kept Textron’s bottom line under pressure in the first quarter.

In line with this, the Zacks Consensus Estimate for first-quarter earnings, pegged at 46 cents per share, suggests a 39.5% fall from the year-ago quarter’s reported figure.

Textron Inc. Price and EPS Surprise

Textron Inc. Price and EPS Surprise

Textron Inc. price-eps-surprise | Textron Inc. Quote

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for Textron this earnings season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Textron has an Earnings ESP of -7.33% and a Zacks Rank #5 (Strong Sell).

Stocks to Consider

Here are some defense companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Northrop Grumman Corp. NOC is scheduled to report first-quarter 2020 results on Apr 29. The company has an Earnings ESP of +1.85% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Huntington Ingalls Industries HII is scheduled to report first-quarter 2020 results on May 7. The company has an Earnings ESP of +1.79% and a Zacks Rank #3.

Curtiss-Wright Corporation CW is scheduled to report first-quarter 2020 results on May 7. The company has an Earnings ESP of +1.75% and a Zacks Rank #3.

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