A month has gone by since the last earnings report for Textron (TXT Quick QuoteTXT - Free Report) . Shares have added about 13.7% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Textron due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Textron Q2 Earnings Beat Estimates, Revenues Fall Y/Y

Textron reported second-quarter 2020 adjusted earnings of 13 cents per share against the Zacks Consensus Estimate of a loss of 15 cents.

Including one-time items, the company posted GAAP loss of 40 cents per share against income of 93 cents generated in the year-ago quarter.

This year-over-year deterioration can be attributed to COVID-19, which led the company to witness lower commercial volume and idle facility cost.

Revenues

Total revenues came in at $2,472 million, which surpassed the Zacks Consensus Estimate of $2,351 million by 5.1%. However, the reported figure decreased 23.5% from the year-ago quarter’s $3,227 million on lower contributions from the company’s Aviation and Industrial segments.

Manufacturing revenues decreased 23.5% to $2,472 million, while revenues at the Finance division declined 6.3% to $15 million.

Segmental Performance

Textron Aviation: In the quarter under review, revenues at this segment plunged 33.5% to $747 million from $1,123 million in the year-ago quarter. The decline was primarily due to lower Citation jet volume, delays in the acceptance of aircraft related to COVID-19 travel restrictions, and lower aftermarket volume, reflecting lower aircraft utilization.

The company delivered 23 jets, down from 46 in the year-ago quarter. It also delivered 15 commercial turboprops, down from 34 in first-quarter 2019.

The segment incurred loss of $66 million in the quarter, down from loss of $105 million in the year-ago quarter, owing to lower volume and mix. The order backlog at the end of the quarter was $1.4 billion.

Bell: Revenues from this segment were $822 million, up 6.6% from the year-ago quarter’s $771 million, primarily due to higher military volume.
The segment delivered 27 commercial helicopters in the quarter, down from 53 last year.

Segment profits were up 14.6% to $118 million on account of higher military volume. Bell’s order backlog at the end of the quarter was $5.8 billion, down $0.6 billion sequentially.

Textron Systems: Revenues at this segment came in at $326 million, up from $308 million in the year-ago period. The upside can be primarily attributed to higher volume at this unit’s unmanned systems product line.

Segmental profits decreased 24.5% year over year to $37 million in the second quarter.

Textron Systems’ backlog at the end of the second quarter was $1.9 billion, higher than $1.4 billion at the end of the previous quarter.

Industrial: Revenues at this segment declined a huge 44.3% to $562 million, due to lower revenues from Fuel Systems and Functional Components as well as Textron Specialized Vehicles.

Moreover, segmental loss was $11 million compared to loss of $76 million in the previous quarter owing to lower volume and mix.

Finance: Revenues at this segment decreased to $15 million from $16 million in the year-ago quarter.

Financials

As of Jul 4, 2020, cash and cash equivalents totaled $2,176 million compared with $1,181 million as of Jan 4, 2020.

Cash outflow from operating activities amounted to $148 million at the end of the second quarter compared with cash outflow of $33 million at the end of the prior-year period.

Capital expenditures were $46 million in second-quarter 2020 compared with $76 million in second-quarter 2019.

Long-term debt was $2,955 million as of Jul 4, 2020, compared with $2,563 million as of Jan 4, 2020.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

VGM Scores

Currently, Textron has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Textron has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.