EPS of $0.76 decreased by 26.9% from previous year
Gross margin of 24.9%
Net income of 141.00M
"We’re probably looking at a one-to-one book-to-bill as we progress through the year, given the lead times and the ramp in deliveries." - Scott Donnelly
Textron Inc (TXT) Q4 2024 Earnings Analysis: Backlog Strength, Margin Dynamics, and 2025 Outlook in Aerospace & Defense
Executive Summary
Textron reported Q4 2024 revenue of $3.613 billion and GAAP net income of $141 million, with adjusted earnings per share of $1.34 for continuing operations, reflecting a divestiture of non-core items and a sizable impact from the Aviation work stoppage in 2024. The quarter was characterized by a sharp rebound in gross margin (0.901 billion gross profit; 24.9% margin) and a return toward production stability after the year-end strike, though margins remained uneven across segments. The company closed 2024 with a robust backlog of $17.9 billion, up $4.0 billion versus 2023, underscoring durable demand across Textron’s diversified portfolio and setting a constructive base for 2025 execution.
Key Performance Indicators
Revenue
3.61B
QoQ: 5.43% | YoY:15.25%
Gross Profit
901.00M
24.94% margin
QoQ: 83.13% | YoY:72.94%
Operating Income
141.00M
QoQ: -32.86% | YoY:105.47%
Net Income
141.00M
QoQ: -36.77% | YoY:-29.85%
EPS
0.76
QoQ: -36.13% | YoY:-26.92%
Revenue Trend
Margin Analysis
Key Insights
Revenue (Q4 2024): $3.613B; QoQ: +5.43% (Q3 2024 revenue was $3.427B); YoY: decline approximately 7% versus $3.9B in Q4 2023 as detailed in management commentary.
Gross Profit: $0.901B; Gross margin 24.9%; QoQ: +83.1%; YoY: +72.9% (reflecting mix and a rebound from strike-related inefficiencies in 2024).
Operating Income: $0.141B; margin ~3.9%; QoQ: -32.9%; YoY: improvement vs heavily pressurized Q4 2023 results in some segments but overall lower year over year.
Net Income: $0.141B; Net margin ~3.9%; QoQ: -36.8%; YoY: negative due to the year-ago items and the profit mix across segments.
EPS (Diluted): $0.76; QoQ: -36.1%; YoY: -26.9% (reflecting the mix and one-time charges in 2024).
Financial Highlights
Quarterly and segment-level highlights:
- Revenue (Q4 2024): $3.613B; QoQ: +5.43% (Q3 2024 revenue was $3.427B); YoY: decline approximately 7% versus $3.9B in Q4 2023 as detailed in management commentary.
- Gross Profit: $0.901B; Gross margin 24.9%; QoQ: +83.1%; YoY: +72.9% (reflecting mix and a rebound from strike-related inefficiencies in 2024).
- Operating Income: $0.141B; margin ~3.9%; QoQ: -32.9%; YoY: improvement vs heavily pressurized Q4 2023 results in some segments but overall lower year over year.
- Net Income: $0.141B; Net margin ~3.9%; QoQ: -36.8%; YoY: negative due to the year-ago items and the profit mix across segments.
- EPS (Diluted): $0.76; QoQ: -36.1%; YoY: -26.9% (reflecting the mix and one-time charges in 2024).
- Backlog: Total company backlog $17.9B at year-end 2024, up $4.0B from 2023; Aviation backlog $7.8B; Bell backlog $7.5B; Systems backlog $2.6B.
- Cash flow: Operating cash flow $0.447B; Free cash flow $0.294B; Net change in cash $0.094B; Cash balance $1.441B at period end; Cash conversion and working capital dynamics mitigated by ongoing ramp activities and strategic actions.
- Balance sheet metrics: Total assets $16.856B; Total liabilities $9.869B; Stockholders’ equity $6.987B; Debt $3.874B; Net debt $1.693B; Current ratio 1.764; Quick ratio 0.838.
- 2025 guidance and cadence: Textron targets revenue around $14.7B (up ~7% vs 2024) and adjusted EPS of $6.00–$6.20; Manufacturing cash flow before pension contributions guided at $800–$900M; Capex ~ $425M; R&D ~$500M; average diluted shares ~184M; segment-level guidance highlights Aviation ~ $6.1B in revenue (12–13% margin), Bell ~ $4.0B (8.5–9.5%), Systems ~ $1.3B (12–13%), Industrial ~ $3.2B (4.5–5.5%), eAviation a small loss (~$70M), Finance ~ ~$25M segment profit.
- Management tone: 2024 headwinds (Aviation strike, Industrial softness) are expected to abate in 2025, with an emphasis on productivity, backlog execution, and margin resilience in core platforms while accepting mix-driven margin dilution from FLRAA ramp and increased commercial activity.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
3.61B
15.25%
5.43%
Gross Profit
901.00M
72.94%
83.13%
Operating Income
141.00M
105.47%
-32.86%
Net Income
141.00M
-29.85%
-36.77%
EPS
0.76
-26.92%
-36.13%
Key Financial Ratios
currentRatio
1.76
grossProfitMargin
24.9%
operatingProfitMargin
3.9%
netProfitMargin
3.9%
returnOnAssets
0.84%
returnOnEquity
1.96%
debtEquityRatio
0.5
operatingCashFlowPerShare
$2.41
freeCashFlowPerShare
$1.58
dividendPayoutRatio
2.84%
priceToBookRatio
1.99
priceEarningsRatio
25.4
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key management insights from the Q4 2024 earnings call and prepared remarks grouped by themes:
- Strategy and growth drivers: Textron emphasized the multi-segment growth trajectory into 2025, with Aviation deliveries ramping as the post-strike production stabilizes, ongoing Bell FLRAA program expansion, and Systems’ continued execution on unmanned systems and ship-to-shore connectors. Scott Donnelly noted that the year-end backlog of $7.8B in Aviation reflected continued demand and improved parts flow to the line; Bell’s FLRAA program remains a major revenue driver alongside steady commercial helicopter activity. He highlighted a one-to-one book-to-bill outlook for Aviation in 2025 and expressed visibility on margin progression throughout 2025.
- Operational execution and cost discipline: The call underscored the benefit of the IAM contract resolution in Aviation, which the company expects to improve parts flow and reduce out-of-station work, contributing to margin expansion guidance for 2025. Donnelly also cited manufacturing productivity gains and a stabilization of the post-strike workforce as key enablers of the anticipated ramp. The strategic review of PowerSports within Industrial, with pre-tax charges of $53M and a $38M inventory charge in Q4, reflects ongoing optimization to improve cost structure.
- Backlog and order activity: Textron reported total backlog of $17.9B at year-end 2024, up $4.0B vs. 2023, signaling a strong platform for 2025. Donnelly pointed to robust demand across product lines, with the Gen3 platform upgrades in Aviation and continued engagement on Ascend/Denali programs; Ascend has logged over 700 flight hours, Denali over 2,500 hours.
- 2025 guidance and risk factors: Dave Rosenberg and Scott Donnelly outlined 2025 targets of about $14.7B in revenue and $6.00–$6.20 in adjusted EPS, with manufacturing cash flow before pension contributions of $800–$900M. Management acknowledged potential margin dilution from FLRAA ramp and higher commercial volumes within Bell, but reiterated a plan to “hold not dollars” on margins as volumes grow. They also acknowledged macro risks from a potential continuing resolution and tariff uncertainties that could affect cross-border supply chains and defense budgeting.
We’re probably looking at a one-to-one book-to-bill as we progress through the year, given the lead times and the ramp in deliveries.
— Scott Donnelly
Backlog in the total company backlog of $17.9 billion, up $4 billion from 2023, positions Textron well for 2025.
— Scott Donnelly
Forward Guidance
Textron’s 2025 outlook reflects a deliberate bet on a rebound in operating performance across its core aerospace and defense franchises, anchored by: (i) a step-up in Textron Aviation deliveries in 2025 as the impact of the 2024 strike dissipates and capacity expands, with 2025 revenue guide of ~$6.1B and 12–13% margins; (ii) continued FLRAA momentum at Bell, contributing meaningful but margin-dilutive growth given higher commercial volume and transition to new platforms; (iii) Systems’ low-to-mid double-digit segment margin with a diversified mix of internally funded and externally awarded programs; (iv) Industrial restructuring benefits while recognizing ongoing soft end markets and cost-reduction initiatives; and (v) a continued investment cadence in eAviation and other R&D programs to support long-term growth. Achievability hinges on: (a) successful ramp of Aviation production post-strike, (b) sustained backlog execution, (c) stabilized supply chains and labor stability, and (d) defense budget and policy clarity, including resolution of any continuing resolutions and tariff negotiations.
Risks and monitoring points for investors:
- Aviation production ramp execution and labor stability (key near-term driver for visibility into 2025 deliveries and margins).
- FLRAA program progression and mix impact on Bell’s margin profile.
- Government procurement climate, including potential delays or policy shifts that could affect contract timing and downselects (FTUAS, RCV, XM-30 program) and defense budget appropriations.
- Cross-segment cash flow dynamics and working capital needs given ramp profiles and higher CapEx in Bell and Systems.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
TXT Focus
24.94%
3.90%
1.96%
25.40%
HXL
25.00%
1.88%
0.38%
219.45%
HII
10.70%
3.66%
2.64%
15.02%
CW
38.50%
18.80%
4.81%
28.72%
MRCY
31.00%
8.62%
1.11%
48.06%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Textron’s near-term investment case rests on a disciplined path to 2025 profitability driven by a stabilizing Aviation platform post-strike, continued FLRAA ramp, and strong backlog execution across segments. Management’s guidance implies a mid-teens percentage revenue uplift from 2024 to 2025 and a target EPS in the $6.00–$6.20 range, supported by manufacturing cash flow in the $800–$900M band. The company’s diversified exposure across high-visibility defense programs and commercial aviation positions Textron to navigate cyclicality better than peers with narrower franchises. Key factors to monitor include the pace of Aviation production ramp, Bell’s FLRAA-related margin trajectory, Systems’ contribution from new programs, and the impact of policy/labor dynamics on cash flow and backlog realization. Valuation appears reasonable relative to guided earnings, with TXT trading at a mid- to high-20s P/E on a portfolio-weighted basis and meaningful upside if 2025 revenue and margin targets are achieved amid improving supply chains and a constructive macro environment.
Key Investment Factors
Growth Potential
Backlog resilience at $17.9B supports near-term revenue visibility; FLRAA and related Bell program expansions present meaningful long-term growth opportunities; Systems’ pipeline and XM-30-like programs offer upside through 2026–2027; eAviation investments could unlock future electrified/hybrid platforms as demand grows in sustainable aviation.
Profitability Risk
Near-term margin dilution from FLRAA ramp and increased commercial content; recurring labor disruptions (Aviation strike history) and pension-related cash flow sensitivity; macro policy and funding volatility (continuing resolutions, tariffs) affecting defense and cross-border operations; cyclicality of aerospace end markets.
Financial Position
Solid liquidity with cash of $1.44B and total debt of $3.87B; debt/equity and leverage indicators modest by industrial standards; strong backlog supports earnings visibility; capital allocation includes $232M of share repurchases in Q4 and $1.1B for 2024 across the year, signaling shareholder-focused capital return.
SWOT Analysis
Strengths
Diversified mix across Textron Aviation, Bell, Textron Systems, Industrial, eAviation, and Finance, reducing reliance on a single end-market.
Robust backlog of $17.9B and solid order activity, with Aviation backlog at $7.8B and Systems’ advances in unmanned platforms.
Healthy operating cash flow generation and a stable liquidity profile (cash at end of period $1.441B).
Shareholder-friendly capital allocation (approx. $1.1B of buybacks in 2024).
Weaknesses
2024 Aviation strike caused production inefficiencies and period overhead pressures, contributing to weaker Q4 margins and a higher cost base that some of which may not fully reverse in 2025.
Margin pressure in Bell due to FLRAA ramp and greater mix of lower-margin commercial OEM deliveries; near-term margin headwinds persist.
eAviation remains loss-making in 2024; ongoing investment in new platforms and controls increases risk until profitability materializes.
LIFO inventory provision recorded in Q4 2024 ($80M) signals potential ongoing inventory valuation and cost-of-sales volatility.
Opportunities
FLRAA program execution at Bell, with potential further awards and sustainment opportunities; negative working capital dynamics could improve over time as production normalizes.
Ascend certification progress and Denali/Citation Ascend programs boosting R&D-driven product development and aftermarket potential.
Expansion of strategic pursuits in FTUAS, XM-30, and Mine Sweeping Payload Delivery Systems, with potential downstream production awards.
Recovery in 2025 end markets and aftermarket growth across Textron Aviation and Bell enhancing overall profitability.
Threats
Uncertain defense funding timeline and potential continuing resolutions could delay program starts or cadence.
Tariff and cross-border trade policy risk affecting Bell/Mirabel and overall supply chain economics.
Macroeconomic volatility and inflation pressures on manufacturing costs and wage stability; supply chain disruption risk remains a consideration post-strike.
Competition and aggressive pricing in the commercial helicopter and aircraft markets could constrain pricing power.