Aerospace and defense company Textron (NYSE:TXT) reported Q1 CY2025 results topping the market’s revenue expectations , with sales up 5.5% year on year to $3.31 billion. Its non-GAAP profit of $1.28 per share was 12.6% above analysts’ consensus estimates.
Revenue: $3.31 billion vs analyst estimates of $3.23 billion (5.5% year-on-year growth, 2.3% beat)
Adjusted EPS: $1.28 vs analyst estimates of $1.14 (12.6% beat)
Adjusted EBITDA: $372 million vs analyst estimates of $354.6 million (11.3% margin, 4.9% beat)
Management reiterated its full-year Adjusted EPS guidance of $6.10 at the midpoint
Operating Margin: 8.5%, up from 6.8% in the same quarter last year
Free Cash Flow was -$180 million compared to -$75.5 million in the same quarter last year
Market Capitalization: $12.03 billion
"In the quarter, we saw strong growth in both military and commercial product lines at Bell," said Textron Chairman and CEO Scott C. Donnelly.
Company Overview
Listed on the NYSE in 1947, Textron (NYSE:TXT) provides products and services in the aerospace, defense, industrial, and finance sectors.
Aerospace
Aerospace companies often possess technical expertise and have made significant capital investments to produce complex products. It is an industry where innovation is important, and lately, emissions and automation are in focus, so companies that boast advances in these areas can take market share. On the other hand, demand for aerospace products can ebb and flow with economic cycles and geopolitical tensions, which can be particularly painful for companies with high fixed costs.
Sales Growth
A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Unfortunately, Textron struggled to consistently increase demand as its $13.87 billion of sales for the trailing 12 months was close to its revenue five years ago. This wasn’t a great result and is a sign of lacking business quality.
Textron Quarterly Revenue
We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Textron’s annualized revenue growth of 3.7% over the last two years is above its five-year trend, but we were still disappointed by the results.
Textron Year-On-Year Revenue Growth
This quarter, Textron reported year-on-year revenue growth of 5.5%, and its $3.31 billion of revenue exceeded Wall Street’s estimates by 2.3%.
Looking ahead, sell-side analysts expect revenue to grow 6.6% over the next 12 months. Although this projection suggests its newer products and services will spur better top-line performance, it is still below the sector average.
Textron has done a decent job managing its cost base over the last five years. The company has produced an average operating margin of 8.1%, higher than the broader industrials sector.
Looking at the trend in its profitability, Textron’s operating margin rose by 2.9 percentage points over the last five years, showing its efficiency has improved.
Textron Trailing 12-Month Operating Margin (GAAP)
This quarter, Textron generated an operating profit margin of 8.5%, up 1.6 percentage points year on year. This increase was a welcome development and shows it was more efficient.
Earnings Per Share
Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.
Textron’s EPS grew at a solid 10.8% compounded annual growth rate over the last five years, higher than its flat revenue. This tells us management responded to softer demand by adapting its cost structure.
Textron Trailing 12-Month EPS (Non-GAAP)
We can take a deeper look into Textron’s earnings quality to better understand the drivers of its performance. As we mentioned earlier, Textron’s operating margin expanded by 2.9 percentage points over the last five years. On top of that, its share count shrank by 19.8%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.
Textron Diluted Shares Outstanding
Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.
For Textron, its two-year annual EPS growth of 10.7% is similar to its five-year trend, implying strong and stable earnings power.
In Q1, Textron reported EPS at $1.28, up from $1.20 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Textron’s full-year EPS of $5.56 to grow 13.1%.
Key Takeaways from Textron’s Q1 Results
We enjoyed seeing Textron beat analysts’ revenue expectations this quarter. We were also glad its EBITDA outperformed Wall Street’s estimates. Overall, we think this was a solid quarter with some key areas of upside. The stock traded up 3.3% to $68.30 immediately after reporting.
Textron may have had a good quarter, but does that mean you should invest right now? We think that the latest quarter is just one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.
