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Will Supply-Chain Issues Hurt Textron's (TXT) Q4 Earnings?

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Textron Inc. TXT is scheduled to report fourth-quarter 2021 results on Jan 27, 2022, before the market opens.

Textron has a four-quarter earnings surprise of 27.89%, on average. The recovery in the aviation market is expected to have favorably contributed to Textron’s revenues. However, the poor performance expected from other segments might have hurt overall results.

Textron Aviation – a Key Catalyst

With the commercial aviation market gradually showing signs of recovery in recent times, TXT’s aviation segment is slowly ramping up, driven by strong demand. Thus, one may expect the company to have witnessed strong deliveries for Citation jets and commercial turboprops in the fourth quarter keeping up with the prior quarter’s trend. This, in turn, must have boosted the segment’s revenues in the soon-to-be-reported quarter. Also, strong order activity and a robust volume are expected to have added impetus to this segment’s performance in the fourth quarter.

Bell’s Lower Military Revenues May Be a Drag

The Bell segment is likely to have been negatively impacted by lower revenues from the military that could have been partially offset by higher revenues from the commercial line of business. A lower net volume and mix might have also weighed down on this unit’s revenues in the soon-to-be-reported quarter.

The Zacks Consensus Estimate for the Bell segment’s revenues in the fourth quarter is pegged at $775 million, indicating a decline of 11% from revenues reported in the year-ago quarter.

Lower Volumes From Textron Systems

The Textron Systems segment may reflect the impact from the U.S. Army's withdrawal from Afghanistan on its fee-for-service contracts on its Air Systems, which might have resulted in lower volumes for the fourth quarter. This is expected to have negatively impacted its segment’s performance in the soon-to-be-reported quarter. However, higher volumes from the other product line might have partially offset the downside effect on its segment’s performance.

The Zacks Consensus Estimate for Textron System’s revenues in the fourth quarter is pegged at $346 million, indicating a decline of 3% from revenues reported in the year-ago quarter.

Industrial’s Performance Remains Gloomy

Revenues from the Industrial business unit may have been negatively impacted by manufacturing disruptions that the company is facing in relation to supply-chain challenges. Within the Kautex business, Textron is witnessing order disruptions related to global auto original equipment manufacturers’ supply-chain shortages. This might have weighed down on this unit’s revenues in the soon-to-be-reported quarter, which can be expected to have been partially offset by favorable pricing at Specialized Vehicles.

The Zacks Consensus Estimate for Industrial’s revenues in the fourth quarter is pegged at $787million, indicating a decline of 9.1% from revenues reported in the year-ago quarter.

Textron Inc. Price and EPS Surprise

Textron Inc. Price and EPS Surprise
Textron Inc. Price and EPS Surprise

Textron Inc. price-eps-surprise | Textron Inc. Quote

Fourth-Quarter Estimates

With the majority of Textron’s segments projected to report an unfavorable top line, one can remain skeptical about the overall revenue outlook of the company in the soon-to-be-reported quarter. The Zacks Consensus Estimate for fourth-quarter revenues is pegged at $3.37 billion, suggesting a decline of 8% from the figure reported in the year-ago quarter.

Textron expects to incur additional contract termination costs and other charges in the range of $5-$10 million in the industrial segment, which might have weighed on its bottom line in the soon-to-be-reported quarter. Also, unfavorable revenues must have hurt its year-over-year earnings performance.

The Zacks Consensus Estimate for fourth-quarter earningsis pegged at 98 cents per share, indicating a decrease of 7.6% from the prior-year reported figure.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for TXT this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. However, that is not the case here.

Textron has an Earnings ESP of -7.28% and a Zacks Rank #3. You can uncover the best stocks to buy or sell, before they’re reported, with our Earnings ESP Filter.

Stocks to Consider

Here are three defense players you may want to consider as they have the right combination of elements to post an earnings beat this season:

Aerojet Rocketdyne Holdings AJRD has an Earnings ESP of +2.00% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Aerojet has a four-quarter average negative earnings surprise of 2.17%. The Zacks Consensus Estimate for AJRD’s fourth-quarter sales and earnings is pegged at $578.5 million and 50 cents per share, respectively.

Embraer S.A. ERJ has an Earnings ESP of +17.65% and a Zacks Rank #3. Embraer has a four-quarter average earnings surprise of 42.21%.

The Zacks Consensus Estimate for ERJ’s fourth-quarter earnings, pegged at 9 cents per share, suggests an improvement of 28.6% over the past 30 days. Embraer boasts a long-term earnings growth rate of 17%.

Virgin Galactic Holdings, Inc. SPCE has an Earnings ESP of +26.12% and a Zacks Rank #2. Virgin Galactic has a four-quarter average negative earnings surprise of 33.86%.

The Zacks Consensus Estimate for SPCE’s fourth-quarter earnings is pegged at a loss of 39 cents per share, indicating a decline of 25.8% from the prior-year quarter’s reported figure. Its 2021 sales estimate, pegged at $3.12 million, suggests a huge improvement when compared to $0.24 million reported in the year-ago quarter.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.


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EmbraerEmpresa Brasileira de Aeronautica (ERJ) : Free Stock Analysis Report

Textron Inc. (TXT) : Free Stock Analysis Report

Aerojet Rocketdyne Holdings, Inc. (AJRD) : Free Stock Analysis Report

Virgin Galactic Holdings, Inc. (SPCE) : Free Stock Analysis Report

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