Textron is a company that is extremely active in the aerospace industry. The focus primarily on products and services that include from aircraft to military defense related equipment. They focus directly in developing equipment and technology to enhance the safety and functionality of our aircraft.
They are a large company with over 35,000 employees and a market cap of around 11.6 Billion with Scott C. Donnelly as their CEO. Textron is a large corporation which under the division of Textron Aviation they own three large brands in the General Aviation industry.
Cessna, Beechcraft, and Hawker aircraft are all created by Textron. Together these three companies play a large role in the GA industry. This sector caters towards private aviation and corporate travel. They focus on creating reliable training aircraft which flight school around the world have adopted into their schools.
Earnings Q3 2019
When we look at Q3 2019 in comparison to Q2 2018 we see that Revenue and Profits have increased. Revenue is now sitting at $3.3 Billion for the quarter. Earnings per share has dropped from $2.26 down to $0.95.
When we break down the area of Textron we can see the major division of Textron Aviation, Bell which is a helicopter brand, and their Systems. There has been a 6% growth in the aviation segment of the business which is what we are primarily looking at.
When we look at how bell has grown we see slightly weaker numbers of only 1.7% growth for the quarter.
The weakest link is their systems division which has revenue loss of 11.6% which is bringing down their total numbers a bit down towards 1.8% growth for the entire company. They have reported expect to pay out $50 Million in pension contributions for the full year of 2019.
Although the aviation industry is growing the demand for new aircraft is lower currently than the demand for used aircraft. The price difference between the two is extreme which pushes individuals to look for cheaper options in the used aircraft market. As more people look to purchase used aircraft this brings down the total profits for the Textron brands.
Many new pilots are not able to afford a new Cessna 172 as the cost can be over 6 figures. We often see new pilots looking to purchase old and used aircraft as they can be purchase for a fraction of the price. As the costs related with new aircraft rises it will only further deter individuals from looking to purchase new.
None the less they still are generating a great deal of their profits in maintaining and up keeping the older aircraft in the sky today. With reliable services and the expertise in their aircraft, Textron can provide extraordinary services for the aircraft they manufacturer.
Maintenance and services helps bring in consistent revenue to make up for the reduction in new orders for aircraft. With most of the aircraft in the air today being between 20-40 years old many aircraft require extensive repairs and maintenance to keep the aircraft air worthy.
The Technicians View
Missing the revenue goal for Q3 was not great for Textron in the Pre-Market after earnings report released at 8am this morning. Fundamentally the release of missed revenue is not a great way to start the day. Based on the headlines we see that the fundamentals are weakening and showing towards a hawkish perspective.
We see a major resistance level sit right at the $50 price level. Price broke down and below the $50 price on 2nd quarter earnings during the month of July.
Price continued on the down trend and created a new support at $42.5. After we tested on the price level and pushed up we stalled out near the same resistance level we fell off from before. Now as we look how price rejected making a new high and created a bearish hammer.
At the start of the morning we see TXT down 6% before the opening bell in New York. We may be looking to make another push towards the downside after the opening of the market today. Expect to see some strong bearish push maybe followed by a consolidation near the $46 price level.
The rest of the year looks slightly sideways trending for Textron as they trade within the current price range. Selling out of the money calls are going to be a great strategy to be able to generate some income during the drop in price after earnings.
Should we see price continue to break down to new low then entering in some put positions would help also ensure that profits can be made during the drop in the stocks price.
There is not need to try and trade alone. Get connected with other individuals who are trading the same industry as you and get involved. Part of the reasons I created this website was not just to share my own ideas and opinions but to also get a chance to hear yours.
What are your thoughts on Textron moving forward?
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As always make sure to keep your risk management and enjoy the process. Happy Trading!