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Textron Q3 deliveries flat as defence drags

Deliveries at Textron’s aircraft manufacturers were stable in the third quarter, helping the parent company raise its earnings per share (EPS) and operating margins during the time frame even as defence products continued to drag on the company’s income.

Textron chief executive and chairman Scott C Donnelly says during the company’s earnings call on 17 October that he is positive about sales of the firm’s newest business jet, the Longitude, but adds that some deliveries of the super midsize aircraft that had been expected in 2019 were being pushed into the new year due to “small but invasive modifications.”

“Revenues were higher in the quarter primarily driven by Textron Aviation and Industrial, and we continued to have good execution with solid margin performance across our businesses,” Donnelly says.

Wichita-based Textron Aviation, which makes turboprops and business jets including the Longitude, generated $1.2 billion in revenue, up $68 million or 6% from last year, mainly driven by aftermarket volume and offset by lower defence volume, the company says. Profit rose by $5 million to $104 million during the quarter. The backlog at the Aviation division at the end of the third quarter was $1.9 billion.

Earnings per share in the quarter rose to $0.95, up 56% from the adjusted EPS a year ago during the same period. The company’s operating margin rose to 9.1%, up from 7.7% a year ago.

Textron now expects 2019 full-year EPS to be in a range of $3.70 to $3.80.

The company’s aviation division delivered 45 jets in the quarter, up from 41 in the same quarter a year ago. Commercial turboprop aircraft deliveries fell to 39 from 43 in 2018. Textron Aviation delivered two T-6 military trainer aircraft in the third quarter this year, three fewer than last year.

The company’s biggest accomplishment in the quarter was Federal Aviation Administration certification of the new Longitude super midsize business jet, secured in late September.

The certification process, which stretched many months longer than had been originally planned, significantly delayed the jet’s entry into service and has led to changes in the way Textron will approach the certification process going forward, Donnelly says.

“The reality was that there was a new process that we did not understand,” he adds. “It was painful to have to go through it.” Of the SkyCourier, the company’s next turboprop aircraft, Donnelly says: “We are working closely with the FAA in a collaborative way and expect the process to go much smoother.”

The company did not give an update on the SkyCourier or the Cessna Denali business turboprop during the earnings report, but it had said earlier that it still expects to perform first flights later this year.

Donnelly adds that the company is seeing some Longitude deliveries pushed into 2020 due to rewiring modifications. “It’s not a big deal but it is invasive and tedious,” Donnelly says.

Executives are monitoring the economic outlook closely for signs of a downturn though they note it’s too early to predict what could happen in 2020. “We need to control our destiny by putting new products out there,” Donnelly says. “It’s not a horrible market but we see some softness among customers who intend to buy aircraft and ask themselves, 'Do I do it now or do I wait?'”

Revenue at Textron’s Bell helicopter division rose to $782 million, up $13 million from a year ago. Profit was $110 million, down $3 million from the same quarter in 2018.

Bell also delivered fewer commercial helicopters in the quarter – 42, compared with 43 in the same period last year. The company says Bell backlog at the end of the third quarter was $5.6 billion.

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