UPDATE: J.P. Morgan Downgrades Textron to Neutral, Reiterates $30 PT on Strong Performance

In a report published Monday, J.P. Morgan analyst Joseph B. Nadol III downgraded the rating on Textron TXT from Overweight to Neutral, but reiterated the $30.00 price target. In the report, Nadol noted, “TXT has had a big move over the last few months, and we are stepping to the sidelines with a downgrade from OW to N. The two major moving parts in the TXT earnings outlook are the expected Cessna recovery in the coming years and the compression in defense. While we do not believe that a recovery in Cessna is fully priced into the stock, we do believe that it is partially so, and fundamentals have not shown any clear signs of improvement in recent months. The defense outlook has deteriorated in recent months due to sequestration, and TXT faces a visible challenge in 2015 as Bell sales and margin are likely to reset lower. We see potential bull case upside for the stock into the mid-30s by year-end if a business jet recovery starts to take hold and defense cuts are not material for TXT, but we also see the stock as vulnerable here to both continued sluggish business jet demand and pressure in defense, and a return to the mid-20s if bad news hits would not be a surprise. As a result, we see risk and reward in balance and our rating moves to N.” Textron closed on Friday at $30.75.