The number one manufacturer of helicopters, Sikorsky, is a subsidiary of United Technologies Corporation (NYSE:UTX) and produces such well-known models as the UH-60M Black Hawk helicopters, and is developing the next generation of “heavy lift” helicopter for the military. United Technologies Corporation (NYSE:UTX) looks like an attractive investment itself with a P/E of just 14.1, a 9% forward growth rate, and a 2.3% dividend yield.
Textron Systems
Textron Systems makes up 14% of the company’s revenues and provides the U.S. Defense Department with solutions for force protection, situational awareness, precision weaponry, and more. The segment’s products include unmanned aircraft systems, armored vehicles, weapons, and many other products.
Industrial
With 24% of Textron’s sales, this segment seems to have the most random mix of products of any of the five. The industrial segment produces EZ-Go golf carts, turf maintenance equipment, blow-molded fuel systems for automobile manufacturers, electrical test instruments, hydraulic tools, and fiber-optic connectors.
Financial
The smallest segment at just 2% of revenues operates in commercial finance. Although this wasn’t always the case, Textron has recently downsized this segment to just financing its own products, and still has some outside finance assets on its balance sheet, although the company plans to continue to reduce this amount.
The numbers
The main reason that I like Textron as an investment is that it is simply too cheap to ignore. At just 13.2 times earnings, I believe shares trade at a discount due to uncertainties in the future of private jet spending as well as the U.S. Government’s future spending. Despite the uncertainty, the consensus of analysts who cover the company project earnings of $2.01 this year rising over the next two years to $2.62 per share, for a 30% increase in profitability over the next two years.
While there is some degree of risk involved with anything involving defense spending right now, I believe that the government will eventually get its act together budget-wise and Cessna’s jets will begin to sell more rapidly over the next several years, producing very nice gains for Textron’s shareholders.
The article This Aerospace Conglomerate Will Thrive in the Economic Recovery originally appeared on Fool.com.
Matthew Frankel has no position in any stocks mentioned. The Motley Fool owns shares of General Dynamics and Textron. Matthew is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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