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Home | Top News | Is Textron Finally Turning Around?

Is Textron Finally Turning Around?

21 August, 2008 11:01:00 Justin Kuepper
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Textron Inc. (NYSE: TXT) shares rose marginally after CNBC's Jim Cramer recommended the stock on his Mad Money Lightning Round. The hedge fund manager turned television star believes that shares are coming off of their lows and the stock represents a compelling buy at these levels. The stock is trading at an affordable 9.73x earnings with a dividend yield of 2.41%, which makes it a buy for many value investors looking to get in at low levels.

Strong demand for Cessna jets and Bell helicopters drove Textron's profits in the second quarter, but shares fell on news of lackluster performance in its financial and industrial segments. Net income at the firm climbed to $258 million, or $1.02 per share, from $210 million, or 83 cents per share, a year ago. Meanwhile, revenues rose some 21 percent to $3.92 billion. The results beat analyst estimates that predicted earnings of 96 cents per share on $3.75 billion in revenue.

The real weakness at Textron is in the financial and industrial segments, which ate into strong aerospace results. This weakness led the company to back its outlook for 2008 operating earnings between $3.80 and $4.00 per share, which has a midpoint below Wall Street's $3.98 average target. The company blamed the problems on rising oil and commodity prices that have put a pressure on the margins of both financial and industrial margins.

Textron is a multi-industry company that operates in 34 countries through four operating segments. Three of these operating segmentsconsist of its manufacturing businesses, which include Bell, Cessna and Industrial. These businesses are all focused on the avion industry, making helicopters, business jets, and planes. The fourth segment consists of its financial businesses. Shares of Textron jumped $0.09, or 0.24%, to $38.12 per share.

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