The Cessna Maker Is Flying Higher

This article is part of our Rising Star Portfolios series.

I first bought shares of Textron (NYSE: TXT  ) , maker of Cessna aircraft and Bell helicopters, for my Rising Star portfolio back in January 2011. I laid out the thesis that the company's various divisions would turn sales around, partly because of a delay in the normal replacement cycle of business jets and golf carts, and partly because of normal events as the economy comes out of recession.

A few months later, I bought shares again because early indications were that I was right on the sales turnaround. All four of the company's segments' sales were trending upward again.

Since then, most everything has continued to improve, as both of these charts show. The first is revenue by segment plotted on a trailing 12-month (TTM) basis, while the second shows operating margins for the four segments, also on a TTM basis. These are current through the latest earnings release.

 

Source: Company filings and S&P Capital IQ.

You can see that each segment's revenue -- except for Textron Systems (defense sales) -- and, more important, operating margins have significantly recovered since the recession-induced lows.

The Cessna segment, which had driven the majority of revenue and operating profit for the company back in 2008, has really improved. I fully expect this trend to continue, despite the slight downturn in trailing segment revenue through the most recent quarter.

My confidence is based on this being a broad sector improvement, not just at Textron. General Dynamics (NYSE: GD  ) , maker of rival Gulfstream jets, reported strong interest in its planes, as did Textron. Honeywell (NYSE: HON  ) also reported increased profits in its aerospace division.

The only downside is the decline in operating profit at its defense division, Textron Systems. However, management reported that it had landed two new contracts with the Department of Defense using a second UAV platform, which should provide a steady revenue stream over the next several years. It also continues to receive orders for other items, such as armored vehicles.

On the plus side, Standard & Poor's just upgraded the debt of the finance segment, Textron Financial Corp., recognizing that this segment is becoming a "pure captive finance unit," meaning it provides financing for customers to buy its products. Textron's been busy over the past several quarters selling off the non-captive financing like golf course mortgages.

There are a lot of good things to like about what's happening at Textron. I'm going to take advantage of that and expand the portfolio's position in the company come Monday.

Come and discuss these and other investments on my Messed-Up Expectations discussion board, or follow me on Twitter.

If you're interested in industrial stocks, but don't like Textron, check out this free report on the new industrial revolution. Click here.

This article is part of our Rising Star Portfolios series, where we give some of our most promising stock analysts cold, hard cash to manage on the Fool's behalf. We'd like you to track our performance and benefit from these real-money, real-time free stock picks. See all of our Rising Star analysts (and their portfolios).

Fool analyst Jim Mueller owns shares of Textron. He's an analyst for the Motley Fool Stock Advisor newsletter service. The Motley Fool owns shares of General Dynamics and Textron. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool's disclosure policy is never messed up.


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