Textron Inc. (NYSE:TXT) is an aerospace conglomerate that manufactures airplanes, helicopters, and a variety of other products, with some well-known brand names among its product portfolio. Since taking a big revenue hit as a result of lower discretionary spending brought on by the financial crisis, Textron Inc. (NYSE:TXT)’s sales have been steadily climbing and the company has been increasingly more profitable every year since then. With some of their key business segments yet to make a full recovery, is now the time to get in, or would our investment dollars be put to better use with one of Textron Inc. (NYSE:TXT)’s larger competitors?
Textron Inc. (NYSE:TXT) operates through five segments, all of which rely on different types of consumers to buy their products. The company does business all over the world, but the majority (62%) still comes from the U.S. About 29% of the company’s sales are the result of U.S. Government contracts, and the seemingly endless budget mess in our government is presumably one reason why shares are trading a bit cheaply right now, but more on that later. First, let’s look at Textron Inc. (NYSE:TXT)’s business segments and how they’re doing.
The Cessna segment contributes 25% of Textron Inc. (NYSE:TXT)’s sales and makes a variety of aircraft, but most of the segment’s sales are in the form of the Cessna Citation business jets. This is the segment I was referring to earlier when I said that some of their key business segments were yet to recover. The market for private and corporate jets simply is nowhere near what it was before the recession hit. Business jet sales plummeted by 29.2% between 2008 and 2012, and are just now stabilizing. Sales are projected by industry analysts to begin to climb during the next several years, thanks to increasing demand from emerging markets.
Competitors in this segment include General Dynamics Corporation (NYSE:GD), whose Gulfstream jets are among the most well-regarded in the industry. Gulfstream currently offers five distinct models of private aircraft, and makes up about a quarter of General Dynamics Corporation (NYSE:GD)’s sales. As an investment, General Dynamics Corporation (NYSE:GD) looks relatively cheap at just 11.4 times this year’s earnings, but the company is projected to grow its earnings at a very slow 2% annual rate going forward.
Bell Helicopter is the world’s third largest helicopter manufacturer and accounts for 35% of Textron’s sales. The company makes helicopters for both commercial and military applications, including the Marine Corps H-1 helicopter and their best-selling V-22 Osprey model. Military helicopters account for 60% of this segment’s revenue, with the rest used for various commercial and government purposes.