Textron Inc. (NYSE:TXT) came out with its third-quarter results last week, and we wanted to see how the business is performing and what industry forecasters think of the company following this report. It looks to have been a decent result overall - while revenue fell marginally short of analyst estimates at US$2.7b, statutory earnings beat expectations by a notable 25%, coming in at US$0.50 per share. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Taking into account the latest results, the current consensus from Textron's nine analysts is for revenues of US$12.7b in 2021, which would reflect a satisfactory 5.3% increase on its sales over the past 12 months. Per-share earnings are expected to shoot up 59% to US$2.62. Before this earnings report, the analysts had been forecasting revenues of US$12.7b and earnings per share (EPS) of US$2.52 in 2021. So the consensus seems to have become somewhat more optimistic on Textron's earnings potential following these results.
The consensus price target was unchanged at US$40.83, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Textron at US$45.00 per share, while the most bearish prices it at US$37.00. Still, with such a tight range of estimates, it suggeststhe analysts have a pretty good idea of what they think the company is worth.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. For example, we noticed that Textron's rate of growth is expected to accelerate meaningfully, with revenues forecast to grow 5.3%, well above its historical decline of 1.2% a year over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 5.6% per year. So it looks like Textron is expected to grow at about the same rate as the wider industry.
The Bottom Line
The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Textron following these results. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider industry. The consensus price target held steady at US$40.83, with the latest estimates not enough to have an impact on their price targets.
With that in mind, we wouldn't be too quick to come to a conclusion on Textron. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Textron analysts - going out to 2023, and you can see them free on our platform here.
Even so, be aware that Textron is showing 3 warning signs in our investment analysis , you should know about...
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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