Will Textron Stock See Higher Levels After Q4 Results?

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Textron stock (NYSE: TXT
XT
) is expected to report its fourth quarter 2022 results on Thursday, January 26. We expect TXT shares to trade sideways after the fourth quarter with earnings expected to be in line and earnings above street estimates. The company will likely continue to benefit from higher aircraft and aftermarket volume. Not only do we expect the company to navigate well in the past quarter, but our forecast indicates that TXT stock has more room for growth, as discussed below. Our interactive dashboard analysis of Example of Textron earnings has additional details.

(1) Expected earnings will be in line with consensus estimates

  • Trefis estimates Textron’s
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    Revenue in the fourth quarter of 2022 will be approximately $3.3 billion, reflecting a low-single-digit year-over-year decline and in line with the consensus estimate of $3.3 billion.
  • With the rising demand for travel, Textron should benefit from a larger number of aircraft and aftermarkets.
  • The industrial activities should continue to benefit from better price realization and volume increases.
  • However, the Bell segment may continue to see revenue declines due to lower military revenues for its H-1 program. Segment revenue was down 9% for the nine months ending September 2022. The Textron Systems segment may also see a decline in revenue due to lower volume.
  • Looking to the third quarter of 2022, the company saw its revenue increase 3% yoy to $3.1 billion, driven by higher sales for its industrial segment.
  • Our dashboard on Textron earnings has more details on the segments of the company.

(2) EPS will likely be above consensus estimates

  • Textron’s adjusted earnings per share (EPS) for the fourth quarter of 2022 are expected to be $1.07 according to Trefis analysis, well above the consensus estimate of $1.00. This compares to the $0.86 figure the company reported in the prior quarter.
  • The company’s net income of $225 million in the third quarter of 2022 reflected a 22% increase from the $185 million figure in the prior year quarter, led by an operating margin increase of 38 basis points.
  • For the full year 2023, we expect earnings per share to be higher at $5.11 compared to earnings per share of $3.33 in 2021 and an estimated $4.83 in 2022.

(3) TXT stocks seem to have more room for growth

  • We estimate Textron’s appreciation about $81 per share, which is 17% higher than the current market price of $69.
  • At current levels, TXT stock is trading at a 13x forward EPS estimate of $5.11, compared to the last three-year average of 18x, implying it has more room for growth.
  • In addition, if the company reports optimistic Q4 results and offers a better 2023 outlook than street estimates, the P/E multiple will likely be revised upwards, resulting in even higher levels for TXT stock.

While TXT stock looks like it has more room for growth, it’s helpful to see how Textron’s colleagues rate on metrics that matter. Other valuable comparisons for companies in different industries can be found at Peer comparisons.

In addition, the Covid-19 crisis has led to many price discontinuities which can provide attractive trading opportunities. For example, you might be surprised how counterintuitive stock valuation is Aerojet Rocketdyne vs. Brink’s Company.

Given higher inflation and the rate hike by the Fed, among other factors, TXT stock is down 1% over the past 12 months. Can it go down even more? See how low Textron shares can go by comparing the drop from previous market crashes. Here’s a performance summary of all stocks in previous market crashes.

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