Textron [TXT] on Wednesday posted strong increases in sales and income in the second quarter driven by the company’s acquisition of Beechcraft this year, a favorable settlement with the Defense Department and solid performance.
Net income climbed 27 percent to $144 million, 51 cents earnings per share (EPS), from $113 million (40 cents EPS) a year ago, topping consensus estimates by a nickel. Sales increased nearly 24 percent to $3.5 billion versus $2.8 billion a year ago.
The sales growth was driven primarily by Textron’s acquisition in March of general aviation aircraft manufacturer Beechcraft, which contributed $425 million to the gains. Organic revenues were up 7 percent, driven by increases in Textron’s legacy general aviation aircraft business, higher deliveries of V-22 tilt-rotor aircraft, H-1 helicopters and commercial helicopters, and more business in the Industrial and Finance segments.
Sales also benefited from a $41 million settlement with DoD related to the former Armed Reconnaissance Helicopter program that was terminated in 2008 during development. The settlement also contributed nicely to the bottom line, adding $16 million to earnings, Frank Connor, Textron’s chief financial officer, said on Wednesday’s earnings call.
Textron also said that net income benefited from higher sales in its Aviation and Industrial segments although inventory and restructuring charges related to the Beechcraft acquisition partially weighed on the results. A year ago severance costs lopped $28 million from the bottom line.
Textron Systems, which makes a range of defense goods, posted a steep decline in sales to $282 million, off $140 million, or 33 percent, as expected, while operating profits held steady at $34 million due to favorable performance across all product lines and a favorable mix of contracts weighted toward higher margin activities.
The company provided backlog figures for three of its divisions, with Bell’s at $5.8 billion at the end of the quarter, down $422 million since the end of the first quarter. Textron Aviation’s backlog stood at $1.4 billion, down $100 million over the quarter, while Textron Systems’ stood at $3 billion, up $186 million over the same period.
Scott Donnelly, Textron’s chairman and CEO, said progress is being made with potential foreign buyers of the V-22, with negotiations ongoing with Israel for the first six units and interest from other governments that should lead to further foreign military sales. He also said the company’s Scorpion ISR/Strike aircraft, which is being developed through a joint venture with AirLand Enterprises, LLC, generated a lot of interest at the Royal International Air Tatoo air show last week and Farnborough International Airshow this week, adding “we are in discussions with a number of customers with potential initial orders.”
Scorpion will also participate in an emergency preparedness exercise later this year with U.S. Northern Command to demonstrated the aircraft’s surveillance capabilities, Donnelly said.
Textron said its guidance for 2014 is intact with EPS from continuing operations expected to be between $1.92 and $2.12.