July 19, 2012
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of aerospace and defense company Textron (NYSE: TXT ) climbed 10% on Thursday after its quarterly results topped Wall Street expectations.
So what: Textron's second-quarter profit was so strong -- EPS nearly doubled to $0.58 versus the consensus of $0.44 -- that analysts have no choice but to raise their valuation estimates on the stock. The company continues to see strong demand for its Bell helicopters and Cessna corporate jets, easing concerns that sales are being pressured by waning business confidence.
Now what: Management maintained its full-year EPS forecast of $1.80-$2.00, citing the still-shaky economy as reason to remain conservative. "It is prudent at this point, given the uncertain nature of the economic and political situation, particularly in the United States, that we be a little cautious about the second half of the year," said CEO Scott Donnelly. When you couple those well-managed expectations with the stock's forward P/E of 11, Textron might have plenty more room to run.
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