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Is Investing in Textron (TXT) Stock a Prudent Choice Now?


We issued an updated research report on Textron, Inc. TXT on Oct 12. The company is a global multi-industry company that manufactures aircraft, automotive engine components and industrial tools.

Textron follows a systematic inorganic growth strategy and thus remains focused on acquisitions. In line with this strategy, during the first quarter, Textron closed the acquisition of Arctic Cat, a leader in the recreational vehicle industry, for $247 million. This acquisition has expanded Textron’s presence in the power-sports segment as well as utility vehicle market, courtesy of Arctic Cat’s established dealer network. Management expects Arctic Cat to contribute $400-$500 million of sales for the company in 2017.

The company also remains focused on innovation to expand its existing operations. To this end, Textron began delivering its new ELiTE series lithium golf cars in the second quarter. Notably, the ELiTE offers high efficiency with zero battery maintenance, apart from demonstrating Textron’s industry-leading product innovation.

Moreover, Textron is forging ahead with the development of its 505 Jet Ranger X programs. We expect, new product offerings will heighten competition and ensure fresh orders for the conglomerate.

On the flip side, Textron’s Aviation business continues to exhibit dismal performance on account of lower military and commercial turboprop volumes. Dearth of international order for the King Air turboprops was the primary reason for its weak performance. As a result, despite strong long-term fundamentals, we remain skeptical about the intermediate prospects of Textron’s commercial aerospace businesses.

Moreover, the company faces tough competition from its peers like The Boeing Company BA, Northrop Grumman Corporation NOC and General Dynamics Corporation GD. This may have caused the company to underperform its industry over a year.

Evidently, Textron's share price gained 41.7% in the last one year, underperforming the industry's rally of 47.7%

Zacks Rank

Textron currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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