Will Textron (TXT) Disappoint This Earnings Season? - Analyst Blog

Textron Inc. TXT is scheduled to report its first-quarter 2014 results before the opening bell on May 1. Textron had posted an earnings surprise of 1.69% in the preceding quarter. Let's see how things are shaping up prior to this announcement.

Factors at Play

Textron has a strong presence in diverse areas of business jets and other general aviation aircraft, helicopter, aircraft engines, golf carts, turf maintenance equipment, electronic test equipment and blow-molded fuel tanks.

2013 was an important year for Textron which saw new product introductions and investments in future growth. The 2014 guidance at Cessna calls for a $3.3 billion revenue which represents approximately 18.5% growth driven solely by new product introductions.

Textron completed the acquisition of Beech Holdings, LLC, the parent of Beechcraft Corporation, in March this year. Under this transaction, it acquired all outstanding equity interests in Beech Holdings for approximately $1.4 billion in cash. The company expects solid growth from the new business segment formed by the merger of its own Cessna segment with the newly acquired unit.

However, with plans to cut almost half a billion in defense spending over the next decade, Textron's performance, like other defense primes, is bound to be affected. Textron generally produces considerable revenues from the U.S. government. Amid budget deficits and political uncertainties, the fortunes of the company remain volatile. Again, Textron's military rotorcraft sales this year are expected to be lower than the 2013 level.

Earnings Whispers?

Accordingly, our proven model does not conclusively show that Textron is likely to beat earnings this quarter. That is because a stock needs to have both a positive  Earnings ESP (Expected Surprise Prediction) and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here.

Zacks ESP: The Earnings ESP for Textron is -5.00% since the Most Accurate estimate is 38 cents while the Zacks Consensus Estimate is pegged higher at 40 cents.

Zacks Rank #2 (Buy): We note that stocks with Zacks Ranks #1, 2 and 3 have a significantly higher chance of beating earnings. The Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.

The combination of Textron's Zacks Rank #2 (Buy) and -5.00% ESP makes surprise prediction difficult.

Other Stocks to Consider

Here are some companies you may want to consider as our model shows that they have the right combination of elements, i.e., a positive Zacks Earnings ESP and a Zacks Rank #1, #2 or #3.

TASER International Inc. TASR has an Earnings ESP of +25.00% and holds a Zacks Rank #2 (Buy). TASER will report first quarter earnings on Apr 30.

Wesco Aircraft Holdings, Inc. WAIR has an Earnings ESP of +3.03% and holds a Zacks Rank #3 (Hold). Wesco Aircraft will report first quarter earnings on May 6.

Other Releases

Northrop Grumman Corp. NOC reported first quarter adjusted earnings of $2.40 per share, surpassing the Zacks Consensus Estimate of $2.15 by 11.6%. The stock currently holds a Zacks Rank #2 (Buy).