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Textron is a multi-industry company that designs, manufactures, and services aircraft, defense systems, and industrial products. Its business segments include aviation, specialized vehicles, and defense technologies. Textron serves commercial, government, and military customers around the world. Its brands span sectors such as aerospace, automotive, and finance.

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Textron (TXT): Company Profile, Stock Price, News, Rankings

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Hello, everyone, and welcome to the Textron Second Quarter twenty twenty five Earnings Call. My name is Emily, and I'll be moderating your call today. After the prepared remarks, you will have the opportunity to ask any questions, which you can do so by pressing star followed by the number one on your telephone keypad. I will now hand over to Scott Hegstrom, Vice President of Investor Relations and Treasurer to begin. Please go ahead.

Thanks, Emily, and good morning, everyone. Before we begin, I'd like to mention that we will be discussing future estimates and expectations during our call today. These forward looking statements are subject to various risk factors, which are detailed in our SEC filings and also in today's press release. On the call today, we have Scott Donnelly, TxRon's Chairman and CEO and David Rosenberg, our Chief Financial Officer. Our earnings call presentation can be found in the Investor Relations section of our website.

Revenues in the quarter were $3,700,000,000 up 5.4% or $189,000,000 from last year's second quarter. Segment profit in the quarter was $346,000,000 up $3,000,000 from the second quarter of twenty twenty four. Adjusted income from continuing operations was $1.55 per share compared to $1.54 per share in last year's second quarter. Manufacturing cash flow before pension contributions totaled $336,000,000 in the quarter compared to $320,000,000 in last year's second quarter. With that, I'll turn the call over to Scott.

Thanks, Scott, and good morning, everyone. Second quarter was a good quarter for Textron with revenue growth in both our commercial aircraft and helicopter businesses as well as in Bell's FLAWR program, is now known as the MV75. Aviation had segment revenues of $1,500,000,000 up 2.8% from the second quarter of twenty twenty four, reflecting higher sales for both aircraft and aftermarket. And the factory operations continue to improve as we ramp production. We delivered 49 jets and 34 commercial turboprops compared to 42 jets and 44 commercial turboprops in last year's second quarter.

Aviation continued to see solid demand across all products with backlog ending the quarter at $7,850,000,000 In the quarter, announced a purchase agreement with a customer in Mexico for four Citation jets and an option for eight additional jets with deliveries expected to begin in 2026. Also during the quarter, Scott Currier hit a number of important milestones including the first delivery in South America, the first Aeromedical order which is also our first order in Africa and as we marked our fifth anniversary of the first flight. On the new product front, we continue to make progress on certification for the M2 Gen two, CJ3 Gen two and the Ascend with deliveries of these aircraft expected to begin in the second half of this year. At Bell, revenues were up $222,000,000 or 28% compared to last year's second quarter, driven by growth in both the MV75 program and our commercial helicopter business. On the military side, the U.

S. Army announced its intention to accelerate the MV75 program and also announced that the one hundred and first Airborne will be the first division to operate the MV75. In the quarter, Bell delivered two MV75 virtual prototypes to the Army, which are advanced simulators based on a digital twin of the MV75. These simulators will be used to support the training and development of tactics, techniques and procedures leveraging the tiltrotor's significant performance benefits in advanced fielding aircraft. We continue to have ongoing dialogue with the Army on specifics related to the acceleration of the MV75 program.

This includes acceleration of the development program, pull forward of initial low rate production and rapid fielding of units to the war fighter. Bell was recently down selected as a sole company for the next phase of DARPA Speed and Runway Independent Technologies X Plane program. During this next phase, Bell will design, construct and perform ground testing of an X Plane demonstrator. On the commercial side of the business, revenues increased $73,000,000 primarily due to the mix of aircraft sold at Bell as Bell delivered 32 helicopters in both the '5 and 'twenty four. During the quarter, Bell received an order for 12 Bell four twelve EPXs from the Tunisian Air Force with deliveries expected to begin in early twenty twenty seven.

In June, Bell signed a five year contract with United Auto Workers for its operations in Fort Worth, Texas. Moving to systems, revenues in the quarter were slightly lower as compared to last year while segment profit margin was 12.5%, up 170 basis points. Earlier this month, systems received a $354,000,000 contract modification from the U. S. Navy to add three ship to shore connector craft.

In addition, the ship to shore connector program received $300,000,000 through the recently enacted reconciliation bill. During the quarter, the U. S. Army announced approval of Milestone B for the XM-thirty program and transitioned the program to the engineering and manufacturing development phase. Also in the second quarter, systems sold the first tsunami aircraft to the U.

S. Navy. The tsunami is an attributable rapidly deployable autonomous unmanned surface vehicle. Moving to industrial, we saw lower revenues in the quarter compared to last year's second quarter reflecting the impact of the disposition of Textron specialized vehicles powersports business and lower volume. At Caltex, we recently received a PENTATONIC award from a leading European automotive OEM for battery electric vehicle composite lower battery housing unit.

This marks the second OEM platform for PENTATONIC and this win secures a major foothold on what is anticipated to become one of the leading global BEV platforms. Segment profit margin was 6.4%, up 180 basis points. At Aviation, the Nuva V300, a long range large capacity hybrid electric VTOL unmanned aircraft continued its flight test program and made its debut at the Paris Air Show in June. With that, I'll turn the call over to David.

Thank you, Scott, and good morning, everyone. Let's review how each of the segments contributed starting with Textron Aviation. Revenues at Textron Aviation of $1,500,000,000 were up $42,000,000 from the second quarter of twenty twenty four, reflecting higher aircraft revenues of $35,000,000 and higher aftermarket parts and service revenues of 7,000,000 Segment profit was $180,000,000 in the second quarter, down $15,000,000 from a year ago, primarily due to the mix of aircraft sold and higher warranty costs, partially offset by the favorable impact of manufacturing efficiencies and higher pricing Backlog in the segment ended the quarter at $7,850,000,000 Moving to Bell. Revenues were $1,000,000,000 up $222,000,000 from the second quarter of twenty twenty four. The revenue increase in the quarter was driven by higher military revenues of $149,000,000 primarily due to higher volume from MV75 and higher commercial revenues of $73,000,000 primarily due to the mix of aircraft sold.

Segment profit of $80,000,000 was down $2,000,000 from last year's second quarter, primarily reflecting higher research and development costs, partially offset by higher volume and mix. Backlog in the segment ended the quarter at 6,900,000,000.0 At Textron Systems, revenues were $321,000,000 down $2,000,000 from last year's second quarter. Segment profit of $40,000,000 was up $5,000,000 compared with the second quarter of twenty twenty four, primarily due to lower selling and administrative expense. Backlog in the segment ended the quarter at 2,200,000,000 Industrial revenues were $839,000,000 down $75,000,000 from last year's second quarter, largely at Textron Specialized Vehicles where revenues decreased 66,000,000 reflecting the impact from the disposition of the powersports business and lower volume primarily in golf products. Segment profit of $54,000,000 was up $12,000,000 from the second quarter of twenty twenty four, primarily reflecting the impact from the disposition of the powersports business and the benefit of cost reductions from restructuring activities, partially offset by lower volume and mix.

Textron e Aviation segment revenues were $8,000,000 in the 2025 as compared to $9,000,000 in last year's second quarter and segment loss was $16,000,000 as compared with a segment loss of $18,000,000 in the second quarter of twenty twenty four. Finance segment revenues were $15,000,000 and profit was $8,000,000 in the 2025 as compared to segment revenues of $12,000,000 and profit of $7,000,000 in the second quarter of twenty twenty four. Moving below segment profit, corporate expenses were $36,000,000 net interest expense for the Manufacturing Group was 26,000,000 LIFO inventory provision was $38,000,000 and intangible asset amortization was $8,000,000 Net special charges were $4,000,000 and the non service component of pension and post retirement income were $67,000,000 Our adjusted effective tax rate for the 2025 was 20%. During the quarter, we repurchased approximately 2,900,000.0 shares, returning $214,000,000 in cash to shareholders. Year to date, we have repurchased approximately 5,800,000.0 shares returning $429,000,000 to shareholders.

To wrap up with guidance, we are reiterating our expected full year adjusted earnings per share to be in the range of $6 to $6.2 We are increasing our expected full year manufacturing cash flow before pension contributions to be in the range of $900,000,000 to $1,000,000,000 up from our previous range of 800,000,000 to $900,000,000 This reiterated adjusted EPS outlook and increased cash outlook incorporates the estimated impact associated with recently enacted tax legislation. The One Big Beautiful Bill Act that was signed into law includes several provisions that benefit cash flow and has some elements that impact our adjusted effective tax rate for the year. As a result, we now expect an adjusted effective tax rate in the range of 20% to 21% for the year. Our adjusted EPS outlook of $6 to $6.2 incorporates this higher adjusted effective tax rate. That concludes our prepared remarks. So operator, we can open the line for questions.

Thank you. We will now begin the question and answer session. Our first question today comes from David Strauss with Barclays. Please go ahead.

Scott, I wanted to ask you about the potential acceleration on NV75. What that could look like? What that can mean for your numbers? And if you could remind us of the contract structure as you move into LRIP?

Sure. David, I mean this is very much a work in process. I would say on the development side, we're already have very good visibility around that I suppose in agreement with the Army on how to proceed on accelerating EMD. That's partly why you're seeing the increased EMD revenue here in 2025. And certainly, will see an acceleration of that in 2026 as we try to get that first aircraft completed and turned over and ready for test.

So I think on the EMD front, it's pretty clear we know what we've got to go do and both we and the Army are working to execute against that. In terms of the production acceleration, the you may recall the LRIP, which was eight aircraft, which was bid in the initial contract, production of that wouldn't have started until really triggering off Milestone C. So that was going to reflect probably about an eighteen month or so gap between the last of the EMD delivered aircraft and LRIP. We're now pulling that forward and the intent is to basically be able to smoothly transition from that last EMD aircraft into the first of the LRIP. So that will probably pull in something on the order of eighteen months.

And then we're also working talking about what does the ramp look like. So it's not just going to be those eight, but what do you think about in terms of the next lot and the next lot right behind that. And so those discussions are still ongoing with the Army. I think what you're seeing primarily in the FY 2026 budget ask is the increased dollars to support that acceleration of the EMD and you would expect to see increase and additional production dollars in the FY 2027 budget ask to support what I just talked about, an acceleration of that first lot, but also lining up the second and the third lots of production.

Okay. Thanks for that. And Dave, could you touch on maybe what some of the offsets were to the higher tax rate to hold the guidance? It seems like Bell's maybe coming in better than you expected.

So as we sit right now, the biggest offset is the timing of our share repurchase this year has been a little ahead of what we originally planned. So from an average share comp perspective, we should be better than what we started the year at. So that in essence gave us the ability to hold the guide with the while at the same time taking this 200 basis to 300 basis point increase in the effective tax rate.

Thank you. Our next question comes from Peter Arment with Baird. Please go ahead, Peter.

Good morning, Scott and Dave. Nice results. Hey, Scott, could you maybe give us a little your thoughts around just kind of the margins at Aviation? I know that you had kind of talked to us about some of the pricing that was going to be lingering from last year flowing through. How do we think about that as we move forward in the second half?

Sharpe, look, I think we're right on track with where we expected to be on Aviation as we guided to the beginning of the year with the recovery kind of coming off of the strike and some of those issues as you mentioned pricing of aircraft that moved into this year. We knew we would be a little more margin challenged in the first half than the second half. So I think we're right on track with that. I think the production ramp is going well. King Air is probably the only one where we've been a little behind.

That's a tougher line to get going and picking back up. The good news is I think that's now running well. We certainly in line with what we expected, we'll see good jet deliveries in the back half of the year, but also much stronger turboprop deliveries in the back half of the year. So and all those dynamics that we were kind of factoring into our plan are playing out exactly as we expected. So we certainly expect to see nice volume increases here through Q3 and Q4 with that margin step ups that will put us right on our target for the full year.

Appreciate that color, Scott. And just maybe just as a follow-up and staying within Aviation, just talk about I guess the demand environment continue to have very good bookings and just what you're seeing in terms of customer interest in the new models?

Yes. The demand has been strong. So we're seeing good order flow. I think customers are very excited about the Gen IIs of both the M2 and the CJ3 coming out. Ascend also getting close to certification here and we have a good backlog on that as well.

So I think the aircraft portfolio is doing really well in the market.

Appreciate it. I'll jump back in queue. Thanks Scott.

Thank you. Our next question comes from Sheila Kahyaoglu with Jefferies. Please go ahead.

Good morning, Scott and David. Maybe let's stick to Aviation. Scott, on that last point, are you seeing any changes given the tariffs on competitors and yourselves? How are you thinking about tariffs? And what were the higher warranty costs you mentioned for the aviation margins?

So we haven't really seen an impact yet on the tower front. I would say that there are certainly some customers and let's say particularly in some Latin American countries that are concerned, but we'll see how that plays out. I guess our view of these things at the moment is to sort of not panic and give it a little time to let things settle out. So we'll continue to kind of watch it and see. But we haven't certainly have not yet seen any kind of dramatic impact.

And as you know, Sheila, the bulk of our deliveries are U. S, the bulk of our manufacturing is U. S. So I think in the grand scheme of things, while the tariff stuff can create some concerns and some noise, think we're actually pretty well positioned with our large North American manufacturing base and our largely North American based delivery. So think in that respect, we're in pretty good shape.

On the warranty, there's always a few things moving around in there. We have had an issue that we've been dealing with probably for a couple of years that we feel like some of the work we're doing in the shops is coming in a little higher than what we originally expected and we thought it was appropriate at this point just to sort of true up the reserves on that to make sure we can cover the balance of work that needs to be done there.

Got it. And maybe if I could ask one on Bell margins. They fell below 8% in the quarter. You called out R and D costs. How should we expect that to progress through the remainder of the year?

Well, look, I mean, do think we saw the as we talked about much higher revenue that we originally had in there on the EMD side of FLAWRA, which is obviously a fantastic program for us, but a little more margin challenged. So I think we'll see the balance of the year up a little bit from where we are certainly this quarter. To be honest, given the fact that we're going to have probably higher than our revenue guide, largely driven by the EMD piece of flora, we'll have higher revenues, but we'll probably be towards the lower end of the bell range driven by that.

Thank you. Our next question comes from Seth Seifman with JPMorgan. Please go ahead.

Thanks very much and good morning. I wanted to ask about systems. And I think two of the competitions that you've been looking at for decisions this year, programs are either canceled or under review, but there's maybe some other opportunities emerging that you talked about. So how are you thinking about the systems outlook and the opportunities for growth there?

Yes, Seth, look, I think the obviously, we were surprised by the situation on RCV and FTUAS to see those programs be terminated. In both those cases, don't think it's the end. I mean, certainly, the Army is going to continue to invest in robotics and we will look for ways to participate in those future activities. The same is true on FQAS. While the program the FQAS itself program was terminated, the Army again is putting more money into tactical UAS system.

So it's going to be acquired a different way, different competition and clearly we will compete for our with our products in those opportunities. So it certainly impacted us in terms of what we would have expected timing of those programs, which we kind of had in the win column. But there's other opportunities that we'll pursue in both those spaces. What is happening in the year is that we're seeing nice growth and a number of big wins in other portions of the systems portfolio that I think will effectively offset the terminations this year of RCV and FTOF. So there's been a number of things, competitions that are already awarded.

Obviously, short connector program continues to grow. The Sentinel program continues to grow. And I think we'll see some nice wins in other pieces of the portfolio as well as we go through the balance of the year.

Okay. Okay. And then this was the think this was probably the highest earnings quarter for Industrial in a little while. Is there do you feel like there's potentially some upside there versus the initial outlook?

Well, look, it's we'll we're probably not revising our guides at the time. But I think the industrial business, as you know, we've done a fair bit on post powersports taking cost out of the business and restructuring. This is a year where you have the cyclical low on the golf side. That's actually a very predictable cycle and totally consistent with our plan. But I think the team is executing well here post powersports and we'll we're certainly feeling good about being in the range despite taking the revenue loss on the disposition of the business.

Thank you. Our next question comes from Robert Stallard with Vertical Research. Please go ahead, Robert.

Scott, first of all, on flower, which I now should call MV75. With the acceleration plan, would this require Textron to put in more capital to enable this eighteen month acceleration?

Yes, Robert, would say sure. I mean, we've always had a capital plan that ties in with the production program and ramping that. So certainly, in terms of how we were thinking about the long term, this would accelerate those plans, let's say, on the order of around eighteen months. So we've always anticipated that this was coming, but it's a manageable number and it's something that we factor into our long range plan. And that's that would be a fantastic outcome if we have to spend more capital sooner to ramp this program.

Right. Yes. And secondly, on Aviation, we've seen some of your peers signing up to new big fleet purchases. Is this something you'd be interested in doing more of going forward?

Look, think we're only interested in fleet business if good business. I mean, our demand continues to be strong. Our retail demand is strong. So we're always happy to look at fleet deals. As you know, we do some fleet deals, but it needs to make economic sense for us participate in those.

In the meantime, we're very happy with our retail business. The demand is there. The backlog is there. So we always look at every opportunity, whether it's a one off aircraft or a fleet.

Thank you. Our next question comes from Myles Walton with Wolfe Research. Please go ahead.

Thanks. Good morning. Scott, I was wondering, given your experience in the Group three UAS market, is there any interest given the attention of the administration in the SecDef on the smaller drone market for higher levels of investment at Textron more broadly?

Well, okay. And the Group three has obviously been our strong suit. So there are opportunities. There's R and D work going on, at some of the smaller classes or, frankly, places where we might participate in some of these programs. But nothing that we would announce or specifically comment on at this time, I guess.

Okay. Good enough. And then I guess from a perspective of the 05/25, is there any update you can offer on that certification? It does seem like the FAA maybe is moving along with things and maybe there's more adjudication that's being done.

Well, look, I mean, it's hard for us to comment. I mean, that's very much an FAA process at this stage of the game. I'd like to think we're in kind of the last stages here and obviously a lot of documentation going back and forth and trying to get through final test criteria. And we're just going to continue to work that with the FAA.

Thank you. Our next question comes from Ronald Epstein with Bank of America. Please go ahead.

Hi, good morning. This is Samantha Styro on for Ron today. I just wanted to ask about capital deployment. You did about $200,000,000 of share repurchases in the quarter. How are you thinking about that going forward? And then M and A opportunities? Thanks.

Sure. Look, as we've said, I think our primary focus on capital deployment is opportunistic share buyback. Obviously, that's certainly what we did in the first half of the year. And I would expect we will continue that through the second half of the year. From an acquisition standpoint, if something made sense, I think we have plenty of capacity to be able to do something like that.

So in the meantime, the most logical thing for us to do and I think the best return for our shareholders in terms of where we are is to continue to focus capital in redeployment via share buyback. Hello?

Thank you. Our next question comes from Doug Hartnett with Bernstein. Please go ahead.

Good morning. Thank you. Going back to demand, you've talked about it. It looks strong. We've heard some of that from others.

But when you consider your how could you describe your discussions with corporate customers? Because on one hand, they've got uncertainty in this environment, this tariff environment on when to make capital investments. On the other hand, you've got bonus depreciation. How do you see these different factors playing into those decisions at your corporate customers?

I think the corporate world is healthy right now. Sure everybody obviously depending on companies have a lot of different exposures or not relative to the tariff situation. But the demand, the dialogues are good. Flying is very strong, right, which helps to drive our aftermarket. So it's sure it appears to us that the corporate world is flying and buying and managing their fleets as you expect in pretty good times.

And then separately at Bell, you're you didn't create you had a higher R and D in the quarter. Where where are you directing that? Is that connected at all to m v '25 or is that on the commercial side? What are you looking at in terms of investment there?

So MV25 is primarily contracted now, right? So that's all under the EMD phase. The R and D spending, obviously it looked lighter, I mean, in the quarter. A year ago, that was largely because of the termination of the power program and sort of close out of that contract and whatnot. But when you look at and think about the balance of our year, we will have higher R and D spending and the R and D spending on the commercial side is largely focused around the 05/25 and completing that program.

On the military side, it's really focused around the R and D programs that we need to execute to support the development of the high speed VTOL program. So especially now with having been selected for the DARPA SPRINT program. So that's sort of I would expect R and D to be fairly flat on quarter to quarter, certainly up over last year, again largely because of the increased spend on R and D associated with the high speed VTOL program.

Thank you. Our next question comes from Noah Poplar with Goldman Sachs. Please go ahead, Noah.

Hey, good morning, everyone. On MV75, when you put the pieces together of movement in timing of EMD and LRIP, does total program revenue grow each of the next few years? Or does it decline at any point in the window as you're shifting from development to LRIP and before you make it to full rate production?

Well, we don't know the exact answer to that yet, Noah. I think we have to continue to work on what the production acceleration looks like. EMD clearly is up here in the next couple of years. The pull forward of LRIP volumes would obviously add to that. So I mean, I guess I feel fairly confident saying it's going to continue to go up the next couple of years, but we've got to get that I mean, from an Army budgeting standpoint, they're this is very much a work in process, right, as they look at their 27, 28 and on program budgets.

Certainly, what the Secretary and the Chief would like to go do when they talk about the volumes and getting things delivered out to the one hundred and first would drive incremental volume here for the next several years.

Okay. And Scott, we the industry has had these other examples of programs that fixed the LRIP pricing at the time of the bid, where, you know, by the time you get to LRIP, there's been cost creep, so your LRIPs are breakeven or loss making. Can you talk about where you see price cost right now on the LRIPs compared to when you bid?

Well, I'm not sure we go into that level of detail. No, I mean, we expect and like you know the LRIP the eight LRIP aircraft were bid as a fixed price as part of the original contract. And so you wouldn't expect margins to be very good there. I think part of what you see in our margin rates is pretty conservative assumptions on our part, to have the appropriate amount of MR to support those programs. But those haven't been definitized yet.

Supplier pricing has been locked in. I don't have specific numbers for you, but we would expect those and always have expected those to be pretty challenging for those first eight aircraft.

Okay. And then just last one, was hoping to ask you about Scott, just how you're thinking about setting supply and deliveries at Cessna for the rest of this year and into next year. Just we've had this window with the strike and supply chain. It's a little tricky to sort of have a sense for where you think supply should be, I guess, on a run rate basis from here.

Yes. Well, look, I mean, obviously, as we got all the way back to the beginning of the year, we certainly have a production plan that has a ramp going through the course of the year. That's been well communicated to all of our suppliers, obviously. And as you know, we're probably a lot of our stuff is in that two year for some of that long cycle material. So certainly, those suppliers are understanding with where we are on the ramp this year and even out through 2026 as well.

So I think supplier communication and recognition of what that supply chain ramp needs to look like is pretty well understood. Not everybody is totally there obviously. The supply chain I would say is in much better condition than it was going back a couple of years ago, but you still have issues that pop up. And as we always say, it's good not to have too many supplier problems, but every supplier part is an important part, right? So it's I think it's not because of a lack of understanding of what the ramp needs to be.

It's execution and obviously we work through that every day.

Should we still be thinking about the 2019 just over 200 units being recovered in the medium term?

I'm not sure we're prepared to give guidance for 2026 just yet.

Thank you. Our next question comes from Gautam Khanna with TD Cowen. Please go ahead.

I was wondering if you could elaborate a little bit on commercial helicopter demand, how that's trending?

Textron (TXT) Q2 2025 Earnings Call Transcript

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