What happened

Shares of Textron (NYSE:TXT) fell 13% on Wednesday after the company announced it was furloughing 7,000 aviation workers. Investors had worried that the COVID-19 coronavirus pandemic would depress demand for Textron business jets and other products. The furlough suggests those worries were justified.

So what

Textron shares have lost nearly half of their value in the last month, as investors worried the maker of everything from snowmobiles to business jets would be hard-hit if the U.S. economy falls into a recession. Textron has been an underperformer in recent years, but going into 2020 there was at least some hope that a rebound in business jet demand and a strong U.S. economy would lead to an upswing.

Those hopes are quickly fading. On Wednesday, Textron announced it intends to furlough 7,000 aviation workers in Wichita for four weeks.

A business jet parked on the tarmac.

A Textron-made Cessna Citation Longitude. Image source: Textron.

In a statement to local media, the company said the decision "will allow us to do our part in mitigating and containing the spread of the COVID-19 through social distancing," but it is clear there are economic factors at work as well. In addition to the furloughs, Textron said, "we are adjusting production to align with anticipated market demand."

The sell-off comes on a miserable day for aerospace suppliers, with Boeing late Tuesday warning that, absent government assistance, the commercial aerospace supply chain could crumble.

Now what

Textron is both a part of that commercial aerospace supply chain, and a customer of many of those suppliers, so it will be hard hit if there is a major disruption or bankruptcies in the sector.

Textron's not a bankruptcy concern, and the stock at just seven times earnings and 0.42 times sales is undoubtably inexpensive. But it is impossible to say when the near-term uncertainty will end, and even after it does end the company is still a chronic underperformer in need of a catalyst to get shares moving again. It's no wonder investors are not buying in even as the stock continues to decline.