Why Acquiring Beechcraft Would Be Great for Textron, Inc.

Textron (NYSE: TXT  ) investors were left smiling Friday, when shares of the defense and aerospace conglomerate jumped more than 14% following an encouraging bit of acquisition news from the folks over at the Financial Times.

Specifically, FT asserted Textron may be close to acquiring fellow plane-maker Beechcraft for approximately $1.4 billion.

Formerly known as Hawker Beechcraft, the target company suffered greatly amid an industrywide decline in business jet sales before seeking bankruptcy protection in May, 2012. The following July, Beechcraft announced a $1.79 billion "exclusivity agreement" to be acquired by China-based Superior Aviation Beijing. However, the deal later fell through when Superior Aviation Beijing failed to secure financing.

But Beechcraft emerged from bankruptcy a healthier business in February, this time sans the "Hawker" moniker and bearing a renewed focus on its more promising propeller-based aircraft segment.

Beechcraft has charged back nicely since then, most recently reporting a 47% year-over-year increase in deliveries for the first three quarters of 2013. What's more, in Q3 Beechcraft secured what it described as "the largest general aviation propeller aircraft order in history," a 105-unit, $1.4 billion King Air 350i order to private jet charter specialist Wheels Up.

Textron to acquire Beechcraft

Beechcraft King Air 350i. Image source: Beechcraft.

Naturally, adding that kind of clout and diversification to Textron's ever-important Cessna subsidiary -- which overwhelmingly relies on sales of its Citation series jets -- could provide a meaningful boost. This becomes especially apparent considering Cessna's revenue declined nearly 24% year over year to $593 million in the most recent quarter, leading to a $23 million segment loss compared to a profit of $30 million in the same year-ago period.

In Textron CEO Scott Donnelly's words, the poor performance was largely achieved "as the light-to-midsize business jet market remained soft."

But wait; there's more ...
If that wasn't enough, Beechcraft in November launched a three-month demo tour of its new AT-6 light attack aircraft, another propeller-driven machine which is being marketed as a "cost-effective solution to meet light attack mission needs."

Incidentally, Textron itself surprised the industry in September by unveiling its very own budget-oriented fighter jet, the Scorpion ISR/Strike aircraft platform. And though the Scorpion hasn't found any takers just yet, it did celebrate its first successful test flight earlier this month -- less than two years since Textron began its development, by the way -- and is aimed at fulfilling the broad-based need for an affordable, exportable tactical jet platform capable of handling lower-threat missions.

In all, then, it appears combining the two companies' cost-conscious jet- and prop-powered defense offerings could allow Textron to more effectively corner that segment of the market as well.

Foolish final thoughts
For now, though, keep in mind nothing's been confirmed just yet, so I wouldn't count on the acquisition until the ink has dried on a formal agreement. But given the potential synergies and complementary product lines Textron and Beechcraft enjoy, at this point it's hard to blame investors for their early optimism.

The 9 stocks in this free report can secure your future
In the meantime, keep in mind Textron investors are also enjoying a small quarterly dividend.

And dividend stocks can make you rich. It's as simple as that. While they don't garner the notability of high-flying growth stocks, they're also less likely to crash and burn. And over the long term, the compounding effect of the quarterly payouts, as well as their growth, adds up faster than most investors imagine. With this in mind, our analysts sat down to identify the absolute best of the best when it comes to rock-solid dividend stocks, drawing up a list in this free report of nine that fit the bill. To discover the identities of these companies before the rest of the market catches on, you can download this valuable free report by simply clicking here now.

Read/Post Comments (0) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2774010, ~/Articles/ArticleHandler.aspx, 9/28/2016 6:49:20 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,339.24 110.94 0.61%
S&P 500 2,171.37 11.44 0.53%
NASD 5,318.55 12.84 0.24%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/28/2016 4:04 PM
TXT $40.18 Up +0.59 +1.49%
Textron CAPS Rating: ****