Textron Tucks in TUG Technologies - Analyst Blog

Textron Inc. TXT, through its Augusta, GA based unit E-Z-GO, took over TUG Technologies Corp., from Jacobson Partners, a private-equity firm based in New York. This acquisition reflects Textron's steady inorganic growth strategy.

TUG based out of Kennesaw, GA manufactures ground support equipment for airlines, air-freight companies, ground handlers, government agencies and airports. Post acquisition, the company will continue to manufacture its products at the Kennesaw facility.

E-Z-GO makes golf cars, utility and personal transportation vehicles, and ground support equipment. The TUG brand will join E-Z-GO's Cushman, E-Z-GO and Bad Boy Buggies brands.

Management expects TUG to expand the product offering at Textron. E-Z-GO already possesses a diversified product-line and the addition of this aviation ground support equipment maker will enhance its capability to serve customers more efficiently.

Indeed the aerospace and defense industry is a fiercely competitive space, with big operators looking to capitalize on every single opportunity to expand their market share and product offerings. Textron's acquisition of TUG Technologies Corp. will expand its operation in the aviation ground support equipment market.

In March this year the company also completed the acquisition of Beech Holdings, LLC, the parent of Beechcraft Corporation, for approximately $1.4 billion in cash. As a result of this acquisition, the company formed a new segment called Textron Aviation, combining its Cessna division with the newly acquired unit.

Textron's investors will be curious to see how these acquisitions bring added synergies to the company. It is worth noting that the company missed the first quarter Zacks Consensus Estimate of 40 cents by 22.5%. For 2014, Textron expects earnings per share from continuing operations in the range of $1.92–$2.12, taking into consideration the Beechcraft acquisition. The Zacks Consensus Estimate for the year is currently at $2.01 per share, at the mid point of the guided range.

Zacks Rank

The stock currently carries a Zacks Rank #2 (Buy). Stocks to look out for in this aerospace and defense space are Embraer SA ERJ, The Boeing Co. BA and Huntington Ingalls Industries, Inc. HII. While Embraer holds a Zacks Rank #1 (Strong Buy), Boeing and Huntington Ingalls carry a Zacks Rank #2 (Buy).