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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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Thank you for standing by, and welcome to the Textron Third Quarter 2026 Earnings Release Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star, followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star one. Please note that today's call is being recorded and will be available for replay later today. I'd now like to turn the call over to Scott Hegstrom, Vice President, Investor Relations. You may begin.

Thanks, Rob, and good morning, everyone. Before we begin, I'd like to mention we'll 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 Lisa Atherton, our Chief Executive Officer, and David Rosenberg, our Chief Financial Officer. Our earnings call presentation can be found in the investor relations section of our website. With that, I'll turn the call over to Lisa.

Thanks, Scott, and good morning, everyone. Textron delivered a strong quarter, with $3.8 billion of revenues and $1.76 in adjusted EPS, as well as $418 million of manufacturing cash flow before pension contributions. Higher jet deliveries at Textron Aviation and program execution at Textron Systems drove double-digit revenue growth at each of these segments. Throughout the quarter, Bell continued to make significant operational progress on the MV-75 program. We continue to advance our separation process for the industrial segment and remain on track to hit our timeline. Given our performance year to date and our expectations for the balance of the year, we are increasing our outlook for both adjusted EPS and manufacturing cash flow. Now I'll go into the segment details. During the quarter, Bell's primary focus was on operational continuity of the MV-75 program.

The US Army successfully received congressional approval for its ATR request related to the MV-75 Cheyenne program, mitigating the risks discussed on our last earnings call related to the government fiscal year 2026 funding. From an operational perspective, the program has made significant progress on the aircraft build. Recent milestones for Bell and Team Cheyenne have included the completion of three wings in Amarillo, receipt of the first nacelles, and completing the first wing and nacelle assembly process, completing the first fuselage at our Wichita Assembly Center, which is expected to be mated with the wing assembly in the fourth quarter, and advancing several critical components into test, such as the first gearboxes. These gearboxes are part of the overall drive system, which was assembled in Bell's new MV-75 Drive System test lab in Grand Prairie, Texas.

We are very excited about the progress made on the program, as the MV-75 remains a top priority for the U.S. military. Modern warfare is increasing the speed, complexity, and lethality of the battlefield, making the ability to maneuver more important than ever. The MV-75 will fundamentally transform how the Army moves and projects combat power in that environment. In other areas of Bell's military business, Bell was awarded a contract for structural and power upgrades to the H-1 fleet under the SPINE program, an important modernization program as H-1s are essential to maintaining attack, strike, and utility capabilities within the Marine Corps. Operationally, Bell continues to focus on initiatives to strengthen the supply chain and improve production efficiency and output, including our ongoing certification of new suppliers and dual sourcing of critical raw materials needed to support gearboxes and rotor blades.

This includes castings, rotor blade extrusions, and various types of aerospace steel alloys. Selective capacity for our problematic assemblies to relieve suppliers and provide on-time delivery has also progressed. These are things like chemical processing, paint operations, and complex assemblies. We continue our focus on automation throughout the product lines. At Aviation, we welcomed Brian Rohloff as President and CEO of the business. Brian is a proven leader with over 29 years of experience at Textron Aviation who brings a deep understanding of our products, our customers, and our industry. Brian has held numerous positions at the company, spanning customer support, sales, supply chain, and quality throughout his career. Most recently, he led our customer support organization. Moving over to the business, Textron Aviation revenues were up $201 million or 14% compared to last year's third quarter, reflecting higher revenue for both aircraft and aftermarket.

We delivered 51 jets and 32 commercial turboprops in the quarter, compared to 42 jets and 39 commercial turboprops in last year's third quarter. Textron Aviation's fleet utilization remains strong, contributing to aftermarket revenue growth of 10% compared to last year's third quarter. Demand across both jets and turboprops continued to be strong, with Aviation experiencing its highest Q3 orders since 2023. On the operational front at Aviation, our focus remains on improving productivity and converting strong customer demand into profitable growth. Moving forward, our priorities are clear as we make investments to drive productivity and profitability. Those investments in fabrication are focused on increasing capacity to improve parts availability on our production lines. This includes adding capacity in areas like machining, sheet metal, and landing gear. Within the assembly, our investments are focused on increasing automation and manufacturing technologies.

This includes expanding our wing cell automation for some of our light jets. Our tooling investment will drive workflow productivity and support new programs such as the Gen3s and our existing platforms such as the King Air. A key project here relates to a significant market opportunity we have on the King Air. We are surging the digitization efforts of this platform, which will enable us to modernize the tooling and processes to build the aircraft more efficiently. We have significantly accelerated this phase of the effort, positioning us to begin capturing incremental benefits sooner. Like Bell, we are dual sourcing and insourcing challenging suppliers to improve quality, increase throughput, and offset inflation. An example here is dual sourcing spars, which have been a gating item in our production.

In terms of product development efforts at Aviation, we continue to make progress on the Denali with over 4,200 flight test hours to date. Our three Gen3 light jet programs are also advancing towards certification, with more than a combined 1,200 flight test hours and the rollout of the first production CJ4 Gen3 as the aircraft advances toward entry into service. Each aircraft features Garmin Emergency Autoland, while the CJ4 Gen3 also includes a significant avionics upgrade to the Garmin G3000 PRIME. We continue to see significant demand for the SkyCourier program across freight, passenger, combi, and special mission applications, and have now introduced the SkyCourier UX concept aircraft, combining the proven SkyCourier platform with Merlin's aircraft-agnostic software solution for autonomous aviation.

During the quarter, we celebrated two significant Citation milestones: the rollout of the 500th Citation Latitude, the world's best-selling mid-size business jet, and the 500th delivery of the Citation CJ4 series, as we prepare for the next chapter of that platform with the upcoming CJ4 Gen3. Moving over to Systems, the segment continued its outstanding performance for the year with revenue growth of 16% in the quarter, driven by execution across its programs. In the quarter, we received a $230 million contract modification for two additional Ship-to-Shore Connector craft. Ship-to-Shore has now reached its full rate production level of four craft per year with significant runway ahead as we have delivered 18 units out of a 73-unit program of record. ATAC also continues to execute well, driven by new contract wins and strong performance in its fleet exercise and adversary air operation.

Our Land business has several platforms contributing to the segment. The FMS program for the MSFV is ramping with planned deliveries of 65 units to Ukraine over the next three years. The Marine Corps' ARV program is scaling pre-production development efforts as we prepare for delivery of 16 units in 2028. The Army's XM30, where we are partnered with American Rheinmetall, is in the process of delivering 10 prototypes to the US Army. At Industrial, our focus remains on supporting our customers, employees, and business partners while we continue to work toward a successful separation of the segment. During the quarter, TSV introduced its third generation of Samsung's battery technology, demonstrating the continued advancement of the E-Z-GO franchise. Kautex has advanced its new technologies throughout the year.

It is currently operating a Pentatonic line in its Windsor, Canada, facility while preparing to open new lines in Detroit and the Czech Republic to support new business. It is also ramping production on its Allegro offering to support the rollout of a robotaxi operator. Overall, across Textron, I am incredibly encouraged by the progress we are making. The underlying demand environment remains favorable, our execution initiatives are beginning to gain traction, and we continue to advance strategic programs and technologies that we believe will create long-term value for our shareholders. With that, I'll turn the call over to David.

Thank you, Lisa, and good morning, everyone. Turning to slide 11 of the earnings presentation. Revenues in the quarter of $3.8 billion were up 4%, or $149 million from last year's third quarter. Segment profit in the quarter was $355 million, compared to $360 million in the third quarter of 2025. During this year's third quarter, adjusted EPS was $1.76 per share, compared to $1.55 per share in last year's third quarter. Manufacturing cash flow before pension contributions totaled $418 million, up from $281 million in last year's third quarter. During the quarter, we repurchased approximately 2.9 million shares, returning $239 million in cash to shareholders. Now let's review how each of the segments contributed, starting with Textron Aviation.

On slide 12, revenues Aviation of $1.7 billion were up 14%, or $201 million from last year's third quarter, reflecting higher aircraft revenues of $152 million and higher aftermarket parts and services revenues of $49 million. The increase in aircraft revenues was primarily due to higher volume and mix, largely reflecting higher Citation jet volume, partially offset by lower commercial turboprop volume. The increase in aftermarket revenues was due to higher volume and pricing. Segment profit was $179 million in the third quarter, up $7 million from a year ago, primarily due to higher aircraft and aftermarket volume and mix, partially offset by an unfavorable impact from manufacturing inefficiencies. Backlog at the end of the second quarter was $8 billion. Looking at Bell, revenues of $933 million were down 9%, or $93 million from the third quarter of 2025.

The revenue decrease in the quarter was primarily driven by lower military revenues of $59 million, largely due to lower volume on the MV-75 program. Commercial Helicopters, parts and services revenues decreased $34 million compared to the third quarter of 2025, largely due to lower volume and mix. Segment profit of $76 million was down $16 million from last year's third quarter, primarily due to lower volume and mix. As Lisa mentioned, in the quarter, Congress approved the $350 million ATR request related to FY 2026 funding for the MV-75 program. Subsequently, approximately $300 million was obligated to the program pursuant to contract modifications during the quarter. Throughout the third quarter, we maintained reduced spending levels to mitigate any funding challenges while continuing to advance the program.

As a result of the ATR approval, modifications and contract changes received, and reduced program spending levels, there was no related cumulative catch-up adjustments during the third quarter. Backlog in the segment ended the quarter at $7.6 billion. At Textron Systems, revenues of $360 million were up 16%, or $50 million, from the third quarter of 2025, largely due to higher volume on armored land vehicles and military training and support services provided by ATAC. Segment profit of $57 million was up $10 million compared with the third quarter of 2025, primarily due to higher volume, partially offset by higher selling and administrative expense, reflecting a net $10 million decrease in a gain associated with the early termination of a vendor contract in the third quarter of 2025. Backlog in the segment ended the quarter at $3.5 billion.

Looking at industrial revenues of $765 million, were up 1%, or $4 million, from last year's third quarter. Textron Specialized Vehicles revenues increased $26 million, or 9%, reflecting higher volume and mix and a favorable impact from pricing. Kautex's revenues decreased $22 million, or 5%, largely reflecting lower volume and mix, partially offset by higher pricing. Segment profit of $38 million was up $7 million from the third quarter of 2025. Finance segment revenues were $13 million, and segment profit was $5 million in the third quarter of 2026 as compared to revenues of $26 million and segment profit of $18 million in the third quarter of 2025. The decrease in revenues and segment profit primarily reflects $11 million of gains recognized in the third quarter of 2025 from the disposition of non-captive assets.

To wrap up guidance, we are raising our expected full-year adjusted earnings per share to be in the range of $6.55-$6.65, from our prior range of $6.40-$6.60. We are also raising our expected full-year manufacturing cash flow before pension contributions to be in the range of $800 million-$900 million, up from our prior range of $700 million-$800 million. This concludes our prepared remarks, and we are happy to open the line for questions.

Thank you. At this time, if you'd like to ask a question, please press star one on your telephone keypad. If you'd like to withdraw your question, simply press star one again. Your first question today comes from the line of Robert Stallard from Vertical Research. Your line is open.

Lisa, maybe we will start it off with Aviation. I was wondering if you are seeing any changes in your customer buying behavior due to the increase in interest rates or any other of these geopolitical issues?

No. Thanks, Rob. We have not seen any changes to that. In fact, as we noted in the remarks, we have actually seen our highest booking of orders in almost three years. So we are continuing to see strong support for our products across the board. I think some of that is driven by some of the investments we have made in increased capabilities on the aircraft, as well as folks wanting the demand for this. We see high demand in flying hours, so we continue to see strong support for the product.

That is great. Then just as a follow-up, on the Defense side, with the MV-75. Now that we have got this funding approved, Dave, I was wondering if you could sort of walk us through what the financial profile for this program is going forward. Thank you.

As we talked about, we got the ATR approved in Q3, which covered our funding requirements for what we invested in the program in Q3. As we go forward, we are obviously currently in a CR situation for at least the short and medium term. We would expect a steady state in Q4, which has already been reflected in the guidance that we have shared with you. Then as we go forward into 2027, we will just kind of wait and see what the funding profile looks like from going from a CR to what we expect will ultimately be an approved defense budget.

Okay. We probably have to wait for appropriations of FY 2027, therefore, to get more clarity on the situation?

Yeah, that is right, Rob. Obviously, I think continuing resolutions have become a bit of standard operating procedures that we have seen over the past several years, so we are working closely with the Army with the funds that they have available. December 11th is when this CR expires, so we look forward to Congress approving a 2027 budget. As you guys have seen reflected previously, it is a very healthy budget for the program, reflecting about $2.3 billion for 2027 and supported across the four subcommittees. I think we look forward to them approving that budget and continuing to move forward with the MV-75.

Your next question comes from a line of Myles Walton from Wolfe Research. Your line is open.

Thanks. Good morning. David, on the free cash flow outlook raise, can you comment on the drivers to that? Also, were there any reserves from prior periods on the MV-75 where you were being more conservative that you actually ended up reversing, or were there no changes whatsoever to the EAC on that?

I'll take the second part first. We didn't reverse anything prior. That really just comes down to the timing of us going from the ATR approval to the contract mod phase. We'll continue to evaluate that as we go forward. Looking overall from the cash flow perspective, the biggest driver in the increase was the lower expected CapEx spend this year by about $100 million. I will state overall, we saw really good, as Lisa mentioned before, order activity at Aviation in Q3 and had corresponding deposits. We expect to continue to have good cash flow performance in Q4. So the combination of those factors is what led us to the $100 million increase to $800 million-$900 million.

Okay. Lisa, any update you can provide on the industrial sale/spin process? Thanks.

Yeah. What I'd say, Myles, is that we're pleased with how the progress is going. We continue to be on our timeline that we talked about back in April. As soon as we make some progress there, we'll be sure to announce.

Your next question comes from the line of Gavin Parsons from UBS. Your line is open.

I was hoping you'd go into a little bit more on the supply chain detail. It's super helpful on all the internal initiatives. A little bit more on external status, and then what timeframe we should expect to see improvement from the vertical integration and the multi-sourcing on those initiatives like spars you've talked about. When should we see that unlock higher deliveries?

Sure. I guess I'll go with the discrete on spars. We've qualified a second supplier. We are starting to see those come into play in the coming quarter, and then we expect that to really transition into progress going into FY 2027. Discreetly, as we're making all of those efforts across the various, I'll say, supply chain insourcing, we should start to see progress with that, both at Bell and at Aviation throughout 2027. Our supply base has actually, when we look at parts available on the factory floor, we are back to where we were in about the 2021 timeframe. We're not where we were in 2019, but we are getting closer to that parts availability that we saw several years ago. The thing that holds us up is probably three or four key supply issues, and it's largely engines, extrusions, spars, and APUs.

We are putting a focus target on those four in order to make sure we can get them in and get the aircraft out the door. So, where I would say we have made a lot of progress across the many thousands of suppliers that we have across the business, those four, we have put a severe focus on in order to get them in the door. But I would say roughly, I feel very good about where we are making progress on the supply chain.

Okay. That is great. David gave us a lot of color on maybe the margin impact last quarter, but maybe just thoughts on what drives the Q4 margin step-up. I think it still needs to be pretty large to get into your guidance range.

At Textron Aviation, I would say it is going to be largely around the turboprop side, so you kind of could view that as a volume mix. Probably we will see a relatively similar profile on jet deliveries. Those are kind of the key drivers in which get us to the higher margin performance overall in Q4, which gets us, as we previously talked about, to the low end of the guidance range of 11%-12% for the total year.

Your next question comes from the line of Gautam Khanna from TD Cowen. Your line is open.

Was wondering if you could elaborate on the MV-75 accounting nuances, because if I recall last quarter, you guys did take a negative EAC related to the funding delay. It didn't sound like you reversed it this quarter. So I wanted to ask about that. And if there's any learning curve lost from what already happened. Then when the LRIP 1 contract is ordered, is it still a $60 million-$110 million negative charge that you expect, or did that number change at all? Thanks.

I'll take the last part first. With the start of the fiscal year in a CR, we'd expect a possible push in the timing of the LRIP award. Previously, we were thinking Q4 into Q1 of next year. As it goes beyond that, you would see just basically on how program accounting works, that that range will probably increase. So it'll probably go up to $110 million-$150 million if, as we expect, that award pushes into next year. On the other question that you had, we did not reverse any of the charges that we took on our Q2 earnings related to the MV-75. The process on the ATR is Congress approved the ATR, and then pieces of that get converted over time into contract mods. As that happens, we recognize it.

The key point is that on Q3, we were able to recognize what our costs were in Q3 and cover those. As timing continues to progress and the remaining contract mods take place, we will then be able to take a look at previous charges.

Your next question comes from the line of Sheila Kahyaoglu from Jefferies. Your line is open.

Good morning, guys, and thank you so much. Hi, Lisa. How are you?

A really great execution in the quarter. Aviation showed us strong progress at 50 jet deliveries, and margins were pretty steady at 10.7%. You talked about it a little bit already, but can you talk us through your latest thinking about restoring some of the inefficiencies and the investments you're making into the supply chain and labor as we start thinking about 2027?

Absolutely. This has been our theme throughout the year as we continue to put investment down on the factory floor, making sure that we are looking where we have jig locks or where we have, I'll say, basic blocking and tackling, where we need to have engineers on the floor next to the team in order to ensure that we can unlock some of the efficiencies that we've lost. We are seeing good progress in several of the lines. We still have a couple of areas that we want to make sure that we focus on, largely in the turboprop space. What we have seen is requests for capital that you will see us start to invest in over the next year that will improve the production tooling that we have out on the factory floor.

That's our next big push, is to put some good capital tooling out on the floor in order to have the work instructions be more commensurate with what this workforce would like to see. Where we have our newer models and we have better work instructions, and we have better tooling, we have better efficiency and better production. We think that's a good model. We're going to continue to push that back into our older models. We also saw some improved learning on some of our new block points that we put in earlier in the year.

As we see those continue to progress and as we work through the new block points that you'll see come out next year with the Gen3s, we're going to work to get ahead of that to make sure we have good learnings and learning curves on those platforms through 2027.

Okay. That's super helpful. Maybe if I could just ask on Systems then, just breakout quarter, 16% growth. I don't think I've seen that business grow 16% and really great margins as well. Can you call out what drove that performance and how we should expect that to continue as we progress through the end of this year and into next?

Yeah, sure. So look, on Ship-to-Shore Connector is a large one. That one has been a tough program for many years, as you guys well know. That one has, to use a pun, is up on plane now. We are starting to see good progress, good productivity. The hours that it takes to build through the various different stations have come down, and we are starting to see consistency from the government in terms of their order activity. For the first time, we are starting to see our ability to forecast out several years in the fight up, and that allows us to have better leverage with suppliers and when we are going out to order materials, so we can get better costing on the supply base. The Ship-to-Shore is something that leads us into, I will say, good growth and productivity there.

On the land side, we mentioned it in the script there, the filling up with the factory floor with the Ukraine MSFVs, 65 vehicles there, 10 prototypes on the XM30, and then the 16 prototypes for the ARV. That is a lot of really great work, and productivity that the team has got going on. Those two in particular have really led to good growth in the quarter. ATAC continues to perform well on their service side, as well as we are seeing growth in our service, Peeper service, both on the Aerosonde still and then in our unmanned surface vehicles on the TSUNAMI and awards in our CUSVs. Look, across the board, I would say just Systems just really hit it out of the park this quarter.

We have a lot of things out there for awards in the coming years, and I expect us to continue to see good growth.

Your next question comes from the line of Seth Seifman from JPMorgan. Your line is open.

Good morning, guys. This is Jamie on for Seth today.

Morning. Thanks for the question. I just wanted to ask quickly about MV-75, the ATR, just to get a little bit of clarity. I know you said the $350 million was approved, I think, but only the $300 million obligated in the third quarter. Would it be safe to assume that the other $50 million would be obligated in the fourth quarter, or is there more nuance there?

Yeah. If I could, what the 350 was the request of the estimate of what the government expected that we would need throughout the third quarter. When those numbers were put together, it was before we had actually completed actuals. As we worked through the quarter and then achieved those actuals, we worked closely with the government once they received their approvals. The government was able to quickly put on contract mod the 300 to cover the actuals that we and our suppliers had accrued. Now we are working through the process where they have completed those mods. We work through invoicing. As supplier invoices continue to trickle in, through this month and next month, we will continue to obligate against that. Yes, the government has additional funds at their discretion that goes up to the full ATR.

As those are required to cover that 2026 spend, they will be able to utilize those. But at the moment, what we have been able to identify and communicate with them is spend the 300.

If I could add to that, as we continue to go through that timing process, as Lisa described, that is the point when we can review the previous [kim] catch that we took in Q2 of 2026. That is just really a timing process that we are going through.

Okay. Got it. That is super helpful. Thank you. Maybe just on the Aviation segment, obviously, healthy growth year-over-year and sequentially for the aftermarket. I know you guys are a little bit less exposed to the large fleet operators, which tend to have higher utilization. I was just wondering, looking at that strong aftermarket performance, is there any differences or drivers between customer types or operator types that is driving that growth in the aftermarket or is it more broad-based?

Yeah, I think it is more broad-based. We are just seeing high utilization across the board on the fleet operators as well as retail side. I think we just see strong. Frankly, our teams service and support people want to come back through to us. We are seeing more folks return to our service and support team in order to have their aircraft managed and handled. I think it has just been a factor of higher hours flown and people rewarding the fact that we are great partners to them in the aftermarket space.

Your next question comes from the line of Noah Poponak from Goldman Sachs. Your line is open.

Can we expect the Aviation segment to have its normal incremental margin next year? Are the additional investments and operational volatility still occurring in the first half such that that does not happen?

Lisa highlighted all the initiatives we're doing. This is going to be, I think, a 12-month journey. As we go throughout next year, you should see improvement throughout the year. We're obviously not ready yet to give guidance into 2027. But this is going to be, I think, a 12-month journey of improvement as we go forward into Q4 and then into the first half of next year.

Okay. Just back to that Systems margin, is there anything one-time in that Systems margin or is it clean? What does that mean for the forward profitability in the segment?

It's one one-time item. It's related to actually in Q3 of 2025, we had a one-time, well it's really a two-time benefit, related to an exit of a lease. There was a benefit in Q3 of 2025. There was also a benefit in Q3 of 2026. Now, if you were to compare the two years, it's actually a headwind, but it did improve the margin somewhat in Q3 of 2026. It's about $9 million if you want to look at that from a comparison perspective. Still very comfortably in the margin range of Textron Systems that we had given for guidance for the year.

Your next question comes from a line of Peter Arment from Baird. Your line is open.

Hey, thanks. Good morning, Lisa, Dave, Scott. Nice results.

Hey, Dave, maybe just a quick one, a clarification on MV-75. Just thinking about your fourth quarter is always typically really strong in terms of cash flow. What is assumed for any collections there? Are any or are we waiting for budgets to be firmed up?

Our collection assumptions are embedded in our guidance. Q3 did have particular challenges relating to cash flow as the timing of the ATR did not get approved till the end of the quarter. But keep in mind, as a credit to the entire team, we anticipated that and took actions in Q2 of 2025 to manage through those cash flow challenges. That, combined with really good performance from Textron Aviation, drove the result. As you can see, based on our cash flow guidance, we expect to have a very strong Q4 cash number.

Got it. That's helpful. Then just Lisa, just quickly, back to Miles' question around the industrial separation. Are there milestone or timelines that you're thinking of? I know there's probably a lot you can't say, but just any color there, that'd be helpful.

Yeah, unfortunately, I don't want to get into that too much just now. But I would just continue to iterate that I'm pleased with the progress and I would say we're going to be able to stick to the timeline that we messaged back in April of a 12-month to 18-month separation or spin.

Your next question comes from a line of David Strauss from Wells Fargo. Your line is open.

Hi, good morning. This is Ben Tomik going for David.

Textron (TXT) Q3 2026 Earnings Call Transcript

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