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Valued at a market cap of $15.5 billion, Textron Inc. (TXT) operates in the aircraft, defense, industrial, and finance businesses. The Providence, Rhode Island-based company’s products include commercial and military helicopters, light- and mid-size business jets, plastic fuel tanks, automotive trim products, industrial pumps, and gears, engineered fastening systems and solutions, and other industrial products.
Shares of this aircraft company have significantly underperformed the broader market over the past 52 weeks. TXT has gained 5% over this time frame, while the broader S&P 500 Index ($SPX) has rallied 31.1%. Moreover, shares of TXT are up 1.2%, compared to SPX’s nearly 24.1% return on a YTD basis.
Narrowing the focus, TXT’s underperformance becomes more evident when compared to the Industrial Select Sector SPDR Fund’s (XLI) 31.4% gain over the past 52 weeks and 21.8% return on a YTD basis.
On Oct. 24, shares of TXT plunged 6.2% after its weaker-than-expected Q3 earnings release. The company’s adjusted EPS of $1.40 missed the consensus estimates of $1.46, and its revenue of $3.43 billion also fell short of the Wall estimates of $3.51 billion. TXT’s aviation segment was adversely impacted by a labor strike, and its industrial segment faced a decline in revenues and operating profit due to continued softness in specialized vehicle end markets. Its lowered full-year 2024 adjusted EPS guidance to $5.40 to $5.60, noting the strike's impact, might have further dampened investor confidence.
Moreover, for the current fiscal year, ending in December, analysts expect TXT’s EPS to decline 1.2% year over year to $5.53. The company’s earnings surprise history is mixed. It surpassed the consensus estimates in two of the last four quarters while missing on other two occasions.
Among the 13 analysts covering the stock, the consensus rating is a “Moderate Buy,” which is based on seven “Strong Buy,” five “Hold,” and one "Strong Sell” rating.
The configuration is less bullish than three months ago, with eight analysts suggesting a “Strong Buy.”
On Oct. 25, Baird analyst Peter Arment maintained an “Overweight” rating on TXT but lowered the price target to $100, which indicates a 23% upside from the current levels.
The mean price target of $99.31 represents a 22.2% upside from TXT’s current price levels. The Street-high price target of $118 suggests an upside potential of 45.2%.
