Textron [TXT] recently reported higher net income and sales in its third quarter driven by strong results at its Bell segment, higher industrial sales and a swing to an operating profit in its Finance segment.
Net income increased 6 percent to $151 million, 51 cents earnings per share (EPS), from $142 million (47 cents EPS). Excluding profits from discontinued operations, earnings in the quarter were 48 cents EPS, three cents below analysts’ expectations.
Sales increased nearly 7 percent to $3 billion versus $2.8 billion a year ago.
The Bell segment drove the higher revenues due to increased deliveries of V-22 tiltrotor aircraft to military customers and higher commercial helicopter deliveries. Sales also benefited from modest gains across the Industrial segment’s businesses and a small gain at Cessna aircraft.
Cessna’s revenues improved on higher used jet sales and increase in aftermarket revenues, more than offsetting a decline in business jet deliveries. The company said that business jet orders were weak in July and August but picked up in September.
Textron’s earnings overcame a $14 million charge at the Textron Systems segment related to start up problems with the company’s two wins earlier this year to provide fee-for-service unmanned aircraft system (UAS) the Navy and Special Operations Command. Textron thought that its success in providing the Army with the Shadow Tactical UAS would provide easily transferrable experience to the new fee-for-service contracts but that turned out not to be the case, Scott Donnelly, Textron’s chairman and CEO, said on a recent earnings call.
Donnelly said that these fee-for-service contracts will likely operate at a loss through the first phase of the program. These are “execution” issues, he said.
On the earnings front, Textron also overcame higher corporate expenses due to increased stock compensation expenses. The net income results were driven by a boost in operating profits at Bell and the turnaround in the Finance segment.
Looking forward to the rest of 2012, Textron raised and narrowed its earnings guidance for continuing operations to between $1.95 and $2.05 EPS from the earlier outlook of between $1.80 and $2 EPS.
Textron won’t provide guidance for 2013 until it reports its 2012 year end results in January but based on market conditions Donnelly said his outlook for the time being is “flattish.”