Cessna worth a mass: overview of industrial conglomerate Textron

Cessna worth a mass: overview of industrial conglomerate Textron

TextronTXT$67.70BuyService in partnership with Tinkoff Investments. Quotes are updated every 15 minutes

Textron (NYSE: TXT) - American industrial conglomerate. The company's business is quite diversified and feels good. But hasn't her stock price run too high over the past few years with her lack of real accomplishments??

When creating the material, sources were used, inaccessible to users from the Russian Federation. We hope, Do you know, what to do.

What do they earn

Often, when reporting companies, the numbers are rounded up, therefore, the totals in graphs and tables may not converge.

According to the company's annual report, its revenue is divided as follows.

  1. Textron Aviation Segment - 37%. Beechcraft and Cessna aircraft, as well as servicing Hawker business jets. The segment's revenue is divided as follows:
    • planes - 68,24%;
    • spare parts and service — 31,76%.

    Segment operating margin — 8,3% from its proceeds.

  2. Bell combat and commercial helicopters - 27%. The segment's revenue is divided as follows:
    • military aviation and its maintenance programs — 61,62%;
    • commercial helicopters, as well as spare parts and services for them - 38,38%.

    Segment operating margin — 12,1% from its proceeds.

  3. Industry - 25%. It is the design and manufacture of goods, mainly in the field of transport. The segment's revenue is divided as follows:
    • fuel systems and functional components — 55,43%. For example, Kautex plastic fuel tanks;
    • specialized transport - 44,57%. These are golf carts., SUVs for housing and communal services, snowmobiles and more.

    Segment operating margin — 4,5% from its proceeds.

  4. Systems — 10%. These are goods and services for defense, aerospace and infrastructure. For example, this segment includes Shadow UAVs. Segment operating margin — 14,8% from its proceeds.
  5. Financial segment — 1%. These are services for the company's customers for the purchase of its helicopters and aircraft., as used, and new. Segment operating margin — 38,77% from its proceeds.

Services in general give 14,47% company revenue, and the gross margin in their case is 25,12% from the proceeds from their sale. The gross margin of goods is 15,05% from the proceeds from their sale.

The commercial sector gives 74% company revenue, and the US government 26%.

Revenue by country and region:

  1. USA - 69%.
  2. Europe - 11%.
  3. Asia and Australia - 9%.
  4. Other, unnamed regions — 11%.

Cessna worth a mass: overview of industrial conglomerate Textron

Cessna worth a mass: overview of industrial conglomerate Textron

Arguments in favor of the company

Divides normally. The company can be divided into at least two different: aviation, which will include Bell, Cessna, Beechcraft, and company with everything else. And if you push too hard, then three companies can do: aviation, industrial and system.

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Separately, different divisions of Textron will grow faster, than a single company, - and not least because, that they can be bought separately.

Considering, what is now in the corporate sphere the fashion for dividing, Activist investor may well join Textron's shareholder ranks, requiring the management of the company to cut it.

Now the capitalization of a single company is 13.46 billion dollars, which in itself is a bit. Its individual components on the stock exchange will weigh a little, which will make their shares pleasantly receptive to an influx of investors.

There is even something. The company mainly produces non-conventional passenger aircraft, business jets and small planes. And this is good: the endless pandemic "grounded" most of the conventional aircraft, but private flights quickly returned to normal and even grew.

And this is logical in the context of an endless pandemic.: “serfs” will be obliged to live in quarantine zones and walk with QR codes according to the schedule, and the "boyars" from among the managers will continue to travel. In general, this creates a positive for the “flight” part of the Textron business..

Cessna worth a mass: overview of industrial conglomerate Textron

Dividends. The company pays 8 cents per share per year, which gives 0,12% per annum. But it takes about 2% from profit. It seems to me, payments may well increase once a 25, if some activist investor raises a fuss.

Price. Now company P / E 18.27 and P / S 1,09. If we compare Textron with the most similar Heico, then Textron looks very inexpensive. It can both attract investors into its shares, and a buyer for her business itself.

Cessna worth a mass: overview of industrial conglomerate Textron

What can get in the way

Well, this. The main indicators of American industry now suggest that, that Textron is not yet suffering from an excess of orders.

Where did you ride? Since the beginning of the coronavirus crisis, the company's shares have risen by almost 34%. That's a lot., if consider, that during this time in her life there were no significant changes: her financial performance is more likely to mark time.

Also confusing is, that in terms of the main indicators of profitability, the Textron business is significantly inferior to the same Heico.

Cessna worth a mass: overview of industrial conglomerate Textron

Accounting. The company has 8.994 billion debts, of which 3.337 billion must be repaid within a year. The company doesn't have a lot of money.: 1,978 billion in accounts and 800 million debts of counterparties. In the context of rising rates and rising cost of loans, this will be a problem both in terms of servicing the debt itself, and in terms of the attractiveness of Textron itself for investors: such amount of debts can scare them away. And even more so, it reduces the likelihood of a significant increase in dividend payments by the company..

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The question also arises, how these debts will be divided in case of division of the company into different issuers.

Logistics. Supply disruptions and rising prices for raw materials are now common problems for all manufacturing companies.. Don't expect, that things will be different for Textron, - better be prepared, that Textron's financials will suffer this couple of quarters.

Cessna worth a mass: overview of industrial conglomerate Textron

Resume

Textron is of interest to me so far only as an issuer with hidden potential: will be able to force it to split up or increase dividends dozens of times, probably, only an investor-activist.

But in order for such an investor to become active, need to, so that the shares fall to values, closest to those, what were at the beginning of the coronacrisis. Then the position of the activist will be justified in the eyes of other Textron shareholders and his campaign will have a chance of success..

Also, the unjustified growth of quotations over the past two years forces us to wait for a correction.. Therefore, I would wait for the stock to fall to 50-55 $.

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