Please ensure Javascript is enabled for purposes of website accessibility

Why Textron Shares Shot Higher in April

By Lou Whiteman - May 4, 2021 at 10:15AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

First-quarter results provide reason for investors to hope the worst is over.

What happened

Shares of Textron (TXT -1.22%) climbed 14.6% in April, according to data provided by S&P Global Market Intelligence, fueled by a strong first-quarter earnings report. Investors have had a long wait, but it appears the industrial conglomerate has finally turned a corner.

So what

It's been a tough few years for Textron. Prolonged weakness in its Cessna business-jet unit, a sector that has never fully recovered from the 2008 financial crisis, has weighed on results, as have a series of one-time issues in various other units.

A Citation Longitude on the tarmac.

Cessna's Citation Longitude. Image source: Textron.

Textron's portfolio is diverse and impressive, including business jets, snowmobiles, car parts, and military equipment. But the company has been struggling to get out of second gear.

First-quarter results provided evidence to suggest the worst is over for Textron, and the shares reacted accordingly. The company earned $0.70 per share in the quarter on revenue of $2.88 billion, easily besting expectations for $0.47 per share in earnings on sales of $2.7 billion. And Textron raised its guidance for full-year adjusted earnings per share by $0.10 to a range of $2.80 to $3.

Now what

Even with the strong April, Textron shares are still underperforming the S&P 500 by about 50 percentage points over the past three years. The quarterly results were a step in the right direction, but the next few quarters will have to come in strong to really see the stock close that gap.

There are still some potential headwinds: Textron's Kautex auto business is likely to see weak demand into the summer due to automaker production issues. But the aviation business appears to be heating up, with Cessna booking business at a rate 1.8 times what was billed out in the quarter.

The big catalyst could come from the government, but is likely to take time: Textron's Bell helicopter unit is a finalist in two multibillion-dollar Army competitions. Should it win at least one, investors might finally see Textron really begin to close the gap with the broader markets.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Textron Inc. Stock Quote
Textron Inc.
$60.05 (-1.22%) $0.74

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/28/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.