After it missed Wall Street estimates on both earnings and revenues yesterday, Textron
One word: No
To my mind, the investors who responded to yesterday's news with a buying frenzy made a big mistake. The problem, in a nutshell, is this: Some parts of the company are going great guns, other parts aren't ... and the ones that are, are starting to misfire.
Sales were up 14% year over year in Q3, but earnings declined 16%, for which you can blame two divisions: Industrial (a situation that Textron's already taking bold and, I would argue, successful steps to rectify), and Finance.
Right now, Finance poses the more serious problem. You may have noticed that we're in the midst of a bit of a financial sticky wicket here in the U.S. One that's already torpedoed Bank of America
Likewise at Textron. Finance profits dropped 67% year over year. And that bad news is about to get worse. Things are so dire that analysts on the post-earnings conference call pressed management to sell the business -- a promise that CFO Ted French seemed noncommittal on, but did not categorically refuse. For the time being, though, management's only promising to "downsize" Textron Financial Corporation. In so doing, it will incur perhaps more than $170 million in asset impairment and restructuring charges during Q4, with the result that the company will not likely earn much more than $0.10 for the quarter.
Even the good news is bad
So that's what's wrong with Textron. Here's what's right: Aerospace. Cessna, Bell, and the Defense and Intel businesses are still turning in strong numbers. And with backlog up over an incredible 50% year over year, the good times seem destined to last a while longer.
Or not. During the conference call, Textron mentioned it was "working hard" to salvage its over-budget Armed Reconnaissance Helicopter program and "expect[ed] a decision soon." And it got it -- but not the decision it wanted.
By day's end, the Pentagon announced it will shut down the ARH program. This is good news for Boeing
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