EPS of $1.18 increased by 16.7% from previous year
Gross margin of 14.4%
Net income of 223.00M
""Under the terms of the contract, the workforce has up to five days to come back in. So, we are starting to ramp and get things back in place."" - Scott Donnelly
Textron Inc (TXT) QQ3 2024 Financial Analysis | Aviation Ramp Post-IAM Strike, Backlog Strength, and 2025 Growth Outlook in Aerospace & Defense
Executive Summary
Textron delivered a Q3 2024 revenue of approximately $3.4 billion, with adjusted earnings per share (EPS) of $1.40 for continuing operations, reflecting the operational disruptions from the IAM labor strike that affected Aviation production and services. Management highlighted a five-week strike impact, with ramp-up efforts already underway as the new five-year labor contract is ratified and workers return to full production. Despite the temporary headwind in Aviation, Textron reported a robust backlog of $7.6 billion across the portfolio as of the end of Q3, underpinning medium-term revenue visibility, particularly in the Bell and Textron Aviation segments. The company narrowed its full-year guidance materially, citing the aviation strike as the primary reason for the downgrade: 2024 adjusted EPS guidance moved to a range of $5.40–$5.60 from $6.20–$6.40, and manufacturing cash flow before pension contributions was trimmed to $650–$750 million from prior guidance of $900–$1,000 million. management emphasized the ramp in 2025, with anticipated revenue growth in Aviation and a multi-year trajectory driven by FLRAA and other programs, supported by a healthier supply chain and stabilized labor force. Backlog strength, favorable pricing in several segments, and a disciplined capital plan (including $215 million in quarterly share repurchases) frame Textron’s risk-reward into 2025. In summary, Textron faces near-term margin compression and cash flow headwinds from the strike, but the medium-term outlook remains constructive thanks to backlog, product updates, and selective program wins across Aviation, Bell, and Textron Systems.
Key Performance Indicators
Revenue
3.43B
QoQ: -2.84% | YoY:-11.95%
Gross Profit
492.00M
14.36% margin
QoQ: -16.33% | YoY:-23.48%
Operating Income
210.00M
QoQ: -41.01% | YoY:-15.66%
Net Income
223.00M
QoQ: -13.90% | YoY:12.63%
EPS
1.19
QoQ: -11.19% | YoY:16.67%
Revenue Trend
Margin Analysis
Key Insights
Revenue: $3.427B in Q3 2024; management noted the quarter was impacted by the IAM strike, with Aviation delivering 41 jets (vs. 39 in prior-year Q3) and 25 commercial turboprops (vs. 38 prior-year).
Gross profit: $492M; gross margin 14.36%; YoY gross profit decline approximately 23.5% based on segment mix and strike-related inefficiencies.
Operating income: $210M; operating margin 6.13%; QoQ margin pressure driven by strike-related idle capacity and ramp costs (Q3 commentary cited a ~5-week disruption).
Net income: $223M; net margin 6.51%; YoY net income up roughly 12.6% but QoQ down about 13.9% (reflecting the tax cadence and one-off items).
EPS (continuing ops): $1.19; diluted $1.18; YoY EPS up ~16.7%; QoQ down ~11.2% (reflecting the revenue and cost headwinds from the strike).
Financial Highlights
Textron QQ3 2024 highlights and trend context (USD, unless noted):
- Revenue: $3.427B in Q3 2024; management noted the quarter was impacted by the IAM strike, with Aviation delivering 41 jets (vs. 39 in prior-year Q3) and 25 commercial turboprops (vs. 38 prior-year).
- Gross profit: $492M; gross margin 14.36%; YoY gross profit decline approximately 23.5% based on segment mix and strike-related inefficiencies.
- Operating income: $210M; operating margin 6.13%; QoQ margin pressure driven by strike-related idle capacity and ramp costs (Q3 commentary cited a ~5-week disruption).
- Net income: $223M; net margin 6.51%; YoY net income up roughly 12.6% but QoQ down about 13.9% (reflecting the tax cadence and one-off items).
- EPS (continuing ops): $1.19; diluted $1.18; YoY EPS up ~16.7%; QoQ down ~11.2% (reflecting the revenue and cost headwinds from the strike).
- Backlog: $7.6B across Textron Aviation and Bell segments; Aviation backlog up by $162M QoQ to $7.6B; Bell backlog $6.5B.
- Free cash flow: $137M for the quarter; operating cash flow $207M; Capex $71M; free cash flow per share $0.733.
- Cash and liquidity: Cash and cash equivalents $1.716B; total cash + investments $1.716B; net debt $1.815B; total debt $3.531B; interest coverage ~8.1x; current ratio 1.83x.
- Share repurchases: ~2.4 million shares repurchased in Q3, totaling $215M; YTD repurchases ~10.1 million shares totaling ~$890M.
- 2024 guidance adjustments (post-strike): 2024 adjusted EPS guidance $5.40–$5.60 (down from $6.20–$6.40); Manufacturing cash flow before pension contributions guided to $650–$750M (down from $900–$1,000M). Management reiterated that the guidance reflects the aviation strike impact and ramp recovery through 4Q, with aviation revenue for the year ~ $5.5B and Bell margin guidance 10.5–11% for the year. A more balanced view applies for Systems (margin at or near the top of 11–12%), Industrial around 4%, eAviation loss of about $75M, and Finance segment around $30M.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
3.43B
-11.95%
-2.84%
Gross Profit
492.00M
-23.48%
-16.33%
Operating Income
210.00M
-15.66%
-41.01%
Net Income
223.00M
12.63%
-13.90%
EPS
1.19
16.67%
-11.19%
Key Financial Ratios
currentRatio
1.83
grossProfitMargin
14.4%
operatingProfitMargin
6.13%
netProfitMargin
6.51%
returnOnAssets
1.36%
returnOnEquity
3.21%
debtEquityRatio
0.52
operatingCashFlowPerShare
$1.11
freeCashFlowPerShare
$0.73
dividendPayoutRatio
1.68%
priceToBookRatio
2.36
priceEarningsRatio
18.39
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key management insights and quotes from the Q3 2024 earnings call are below, grouped by themes:
- Strategy and ramp recovery (Aviation): Scott Donnelly emphasized the ramp-up after the IAM strike: "Under the terms of the contract, the workforce has up to five days to come back in. So, we are starting to ramp and get things back in place." Management indicated roughly 60% of the workforce was back as of a recent update, with the expectation of full representation shortly as the factory ramps to normal productivity.
- Backlog and demand: The team cited continued demand in Aviation with robust order activity; Aviation backlog stood at $7.6B end-Q3, and Bell backlog at $6.5B, underscoring durable demand in defense and commercial helicopter platforms.
- Program momentum (FLRAA, RCV, FTUAS, NX eVTOL): Bell noted Milestone B approval for FLRAA,; Systems milestones on FTUAS and Robotic Combat Vehicle indicate potential growth catalysts in coming years; FLRAA is a key driver of next-year revenue growth expectations.
- Financial impact of strike and ramp plan: Frank Connor highlighted that delayed deliveries and IAM strike-related performance affected Aviation revenue by about $50M and segment profit by about $30M in Q3, reinforcing the 5-week strike assumption for the year. He noted inventory headwinds tied to ramp, with plans to burn down inventories in 2025 as ramp normalizes.
- Guidance and capital allocation: Textron guided 2024 EPS down to $5.40–$5.60 and manufacturing cash flow prior to pension contributions to $650–$750M; management flagged continued buybacks (2.4M shares in Q3) and a commitment to return capital while aligning with the ramp to 2025 volumes. The leadership also announced executive changes: CFO transition from Frank Connor to Dave Rosenberg effective March 1, 2025, and IR leadership changes. Scott Donnelly stressed a plan to drive productivity to offset wage inflation and ramp costs, with direct labor comprising about 10% of costs.
- 2025 outlook and risk factors: Management projected revenue growth in 2025, particularly in Aviation, aided by budgeted FLRAA funding and continued demand in commercial aviation, while acknowledging supply chain stabilization and labor productivity improvements as critical to achieving higher margins. Pete Arment and Noah Poponak discussions around 2025 ramp and margin framework reflect a continued focus on productivity gains and 18–24 month visibility in some product lines.
"Under the terms of the contract, the workforce has up to five days to come back in. So, we are starting to ramp and get things back in place."
— Scott Donnelly
"Backlog grew $162 million, ending the third quarter at $7.6 billion."
— Scott Donnelly
Forward Guidance
Textron’s forward-looking commentary highlights a bifurcated but constructive path:
- 2024 guidance: Adjusted EPS of $5.40–$5.60; Manufacturing cash flow before pension contributions of $650–$750M; Aviation revenue around $5.5B with ~11% segment margin; Bell margin 10.5–11%; Systems margin at the top end of 11–12%; Industrial revenue about $3.5B with ~4% margin; eAviation revenue around $35M with a ~ $75M loss; Finance revenue around $50M with ~ $30M margin; Corporate expenses around $135M; tax rate ~17.5%.
- 2025 outlook and expectations: Management signaled an expected rebound in Aviation volumes as ramp proceeds, with a continued emphasis on productivity and cost control to offset wage inflation from the five-year labor agreement. They anticipate revenue growth above the 2024 guide with FLRAA’s continued funding and other programs (RCV, FTUAS) contributing meaningfully. The company expects manufacturing and supply chain normalization to support higher utilization, improved overhead absorption, and stronger free cash flow over time.
- Key metrics investors should monitor: (i) Aviation production ramp efficiency and part availability (supply chain health), (ii) progress on FLRAA and related U.S. Army funding for 2025, (iii) Industrial restructuring outcomes and demand stabilization in Specialized Vehicles, (iv) Systemic margins (11–12% in Systems; 4% in Industrial; 11% in Aviation) and (v) free cash flow trajectory to validate deleveraging and capital-return framework.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
TXT Focus
14.36%
6.13%
3.21%
18.39%
HXL
23.30%
11.50%
2.50%
31.65%
HII
11.70%
2.98%
2.40%
25.85%
CW
37.30%
18.10%
4.46%
28.24%
MRCY
27.00%
-8.21%
-1.32%
-32.81%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Textron faces a near-term earnings headwind in 2024 due to the IAM strike, with EPS guidance trimmed to $5.40–$5.60 and manufacturing cash flow of $650–$750M. However, the company benefits from a robust backlog (~$7.6B) and a clearly articulated path to revenue growth in 2025 driven by Aviation ramp, FLRAA program momentum, and continued government program awards (FTUAS/RCV). The combination of backlog resilience, strategic product updates, and an improving supply chain position supports a constructive long-term thesis, albeit with higher near-term earnings volatility. Investors should monitor the pace of aviation ramp, 2025 funding for FLRAA and other defense programs, labor productivity improvements, and the potential for further margin upside as overhead absorption normalizes. Relative to peers in defense and aerospace, Textron’s diversified mix yields steadier overall exposure but still carries higher cyclicality and a need for successful integration of cost-out initiatives. The stock’s valuation (P/E around the upper teens; P/B ~2.36; P/S ~4.79) reflects a premium given backlog and growth potential, yet requires execution clarity on 2025 ramp and margin recovery.
Key Investment Factors
Growth Potential
Backlog strength (Aviation and Bell) supports near-term revenue visibility; FLRAA program milestones and Army FTUAS/RCV initiatives offer meaningful long-run growth potential for Textron Systems and Bell's military portfolio. 2025 revenue progression in Aviation, aided by ramp stabilization and introduction of Gen3 M2, CJ3, CJ4 updates, reinforces a favorable growth trajectory. The 18–24 month visibility in some aircraft programs can reduce cycle risk and improve scheduling certainty.
Profitability Risk
Strike-related ramp disruption and inventory overhang in 2024; ongoing supply chain volatility and integration risks in eAviation; potential wage inflation from the five-year labor agreement; macroeconomic uncertainty affecting aviation demand; defense budget headwinds or shifts in spending priorities; execution risk around FLRAA and RCV programs delivering on cost and schedule expectations.
Financial Position
Healthy liquidity with cash of $1.716B and total debt of $3.531B; net debt of $1.815B; interest coverage ~8.1x; current ratio ~1.83x. Moderate balance sheet leverage with a diversified product mix across Aviation, Bell, Textron Systems, Industrial, and Finance; dividend policy modest (low current yield) and substantial share repurchase activity supports capital return but requires discipline given cyclicality in Aerospace & Defense.
SWOT Analysis
Strengths
Diversified portfolio across Aviation, Bell, Textron Systems, Industrial, eAviation, and Finance.
Strong backlog totaling $7.6B (end-Q3 2024) with Aviation and Bell contributing meaningful visibility.
Capital deployment discipline including share repurchases (~$215M in Q3); robust cash flow generation and liquidity.
Embedded defense and government programs (FLRAA, FTUAS, RCV) offering durable growth opportunities.