UPDATE 4-Textron profit tops Street, CEO calls sales bottom

* Q1 EPS ex-items of $0.05 vs. -$0.03 Wall St view

* Revenue down 12.5 pct, CEO calls that ‘trough’

* Holds outlook steady, sees 18-50 pct drop in 2010 profit

* Shares up 9.6 percent
(Adds CEO, investor quotes, updates stock movement)

By Scott Malone

BOSTON, April 22 (BestGrowthStock) – Diversified U.S. manufacturer
Textron Inc (TXT.N: ) posted results that topped Wall Street’s
expectations and said it believes its revenue has hit a bottom
for the cycle, sending its shares up 8 percent.

The company on Thursday reported that a
better-than-expected performance at its industrial arm, which
makes products ranging from automotive components to EZ-Go golf
carts, helped the unit reverse a year-earlier loss. Every
Textron division except for Cessna, the world’s largest maker
of corporate jets, was profitable for the first quarter.

Management held steady on its 2010 forecast — which calls
for profit to fall 18 to 50 percent — but said the worst is
behind it.

“We believe the first quarter marks a revenue trough for
Textron and we believe earnings will clearly grow over the
course of the year,” said Scott Donnelly, a former General
Electric Co (GE.N: ) official who became chief executive officer
of Textron on Dec. 1.

The company, which also makes Bell helicopters and has a
finance arm it is aggressively cutting back, recorded a net
loss for the quarter after charges related to restructuring and
the recent U.S. healthcare reform law.

Factoring out those items, Providence, Rhode Island-based
Textron would have earned 5 cents per share. On that basis,
analysts had looked for a loss of 3 cents, according to Thomson
Reuters I/B/E/S.

“Our sense is that multiple investors believed the loss had
the potential to be much larger than that,” said Goldman Sachs
analyst Noah Poponak.


The U.S. industrial sector, which slashed jobs aggressively
through the worst recession the country has seen since the
Great Depression of the 1930s, has generally reported solid
financial results for the first quarter.

Also on Thursday, Danaher Corp (DHR.N: ) reported
better-than-expected first-quarter results and raised its
full-year profit target. [ID:nN21179899] Earlier in the week,
United Technologies Corp (UTX.N: ) and Eaton Corp (ETN.N: ) also
beat Wall Street’s profit expectations.

“If you look broadly across the industrial sector,
expectations were high and a lot of the expectations have been
met, not just with Textron, but the industrial sector as a
whole,” said Perry Adams, a vice president at Huntington
Private Financial Group in Traverse City, Michigan, who manages
portfolios that include Textron shares. “Revenues have been
coming back. The developing nations are past recovery, their
economies are doing well.”

A broader rebound in corporate profit is good news for
Textron, since sales of its Cessna business jets — which
plummeted through the downturn — tend to rebound when
corporate profits grow, albeit with more than a year’s lag.


Textron posted a net loss of $8 million, or 3 cents per
share, compared with year-earlier net income of $86 million, or
35 cents per share.

The results included an $11 million charge from the
recently passed U.S. healthcare reform law, which limits tax
breaks for providing drug coverage for retired workers.

Revenue fell 12.5 percent to $2.21 billion, below analysts’
estimates of $2.38 billion.

Cessna recorded an operating loss for the quarter as
revenue fell 44.7 percent, while the company’s industrial unit
reversed a year-earlier loss on a 31.6 percent surge in
revenue, led by a rebound in the global automotive industry.

Shares of Textron rose $2.07 or 9.6 percent to $23.67 on
the New York Stock Exchange. Earlier, they hit $23.72, the
highest they have been since October 2008.

The stock has doubled in value over the past year,
outpacing the 65 percent rise of the Standard & Poor’s capital
goods industry group (.GSPIC: ).

Textron slashed about 20 percent of its workforce during
the downturn, which pushed its stock to 25-year lows in March
2009 as investors worried that its finance unit would drag the
entire company down.

The company continues to trim that operation, which had
expanded into businesses like loaning money to golf course
developers, to operate solely as a traditional captive finance
unit, providing loans to companies that buy Textron products.

Donnelly told Reuters in September that Textron’s top
priority for its capital would be paying down the company’s
debt, which stood at $6.85 billion at the quarter’s end.

Textron on Wednesday paid back $250 million of its bank
credit line, said Chief Financial Officer Frank Connor, who
joined Textron from Goldman Sachs Group Inc (GS.N: ) on Aug. 1.

Its rivals include the Gulfstream unit of General Dynamics
Corp (GD.N: ) and Canada’s Bombardier Inc (BBDb.TO: ) in corporate
jets, and United Tech in helicopters.

Investment Analysis

(Reporting by Scott Malone; Editing by Gerald E. McCormick and
Lisa Von Ahn)

UPDATE 4-Textron profit tops Street, CEO calls sales bottom