Textron’s revised forecast spooks investors

PROVIDENCE – Shares in Textron Inc. (NYSE: TXT) had their biggest decline in half a year yesterday, after the company pared its second-quarter earnings forecast for the Finance segment, even though Textron affirmed its company-wide predictions.
Textron Finance’s earnings will be “significantly less than previously forecast,” the company had said Friday in an after-market statement. It cited higher loan-loss provisions, of about $20 million, and a one-time charge of about $10 million related to “sale in, lease out” (SILO) leveraged-lease transactions previously challenged by the U.S. Internal Revenue Service.
Still, Textron said, the “weaker profit at Finance in the second quarter and for the full year is expected to be offset, primarily by higher profits in the aircraft and defense businesses.”
Overall earnings per share from continuing operations in the period are now estimated at 93 cents to 98 cents – a similar though narrower range than the company’s previous projection of 90 cents to $1 per share. And for the full year, Textron continues to predict earnings from continuing operations of $3.80 to $4 per share and free cash flow of $700 million to $750 million.
“Despite further softening in our commercial finance business, 2008 is shaping up to be another very good year for Textron overall as we continue to see strong demand and performance at Cessna, Bell Helicopter and Textron Systems,” Chairman, President and CEO Lewis B. Campbell said in a statement.
In New York trading yesterday, Textron stock fell $3.76, or 6.5 percent, to $54.42 per share, in what Bloomberg News said was its biggest decline since Jan. 17. But Nicole Parent, an analyst at Credit Suisse, reassured investors in a note yesterday that “Cessna, Bell and Systems continue to perform well, which should offset the weakness at Finance.” Parent rates Textron stock as “neutral,” Bloomberg said.
The company’s second-quarter financial report is slated for release July 17.
Textron Inc. (NYSE: TXT) is a $13.2 billion multi-industrial company employing about 44,000 people in 34 countries. Its brands include Bell Helicopter, Cessna Aircraft Co., Jacobsen, Kautex, Lycoming, E-Z-GO, Greenlee, Fluid & Power among others. Additional information is available at www.textron.com.