TEXTRON INC Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Aviation: Strike with IAM ended; delivered 41 jets, 25 commercial turboprops; aftermarket revenues up; booked over $1 billion in new orders; backlog grew; announced Gen3 updates for Citation models.
• Bell: Revenues up; segment profit up; U.S. Army approved Milestone B for FLRAA program; backlog grew by $2.3 billion; commercial order activity increased.
• Textron Systems: Slight revenue/profit decline; completed milestones in Army's FTUAS program; expanded U.S. Navy Aerosonde operations; delivered Ripsaw M3 Robotic Vehicles.
• Industrial: Lower revenues/profit due to Specialized Vehicles softness; cost actions taken to align with lower production volumes.
• Executive Changes: Frank Connor to retire; Dave Rosenberg to become EVP and CFO; Scott Hegstrom to be VP of Investor Relations

Segment Performance

• Aviation: Revenues $1.3 billion in Q3 2024, essentially flat with Q3 2023; higher pricing offset by lower volume/mix; segment profit $128 million, down $32 million from Q3 2023; backlog ended at $7.6 billion, up $162 million from Q2.
• Bell: Revenues $929 million, up $175 million from Q3 2023; segment profit $98 million, up $21 million; backlog ended at $6.5 billion.
• Textron Systems: Revenues $301 million, down $8 million from Q3 2023; segment profit $39 million, down $2 million; backlog ended at $1.9 billion.
• Industrial: Revenues $840 million, down $82 million from Q3 2023; segment profit $32 million, down $19 million; driven by Specialized Vehicles softness.
• eAviation: Revenues $6 million, segment loss $18 million; Nuuva 300 in integration testing; Nexus eVTOL program progressing.
• Finance: Revenues $12 million, profit $5 million

Guidance

• Adjusted EPS for 2024: $5.40-$5.60 per share (down from previous $6.20-$6.40).
• Manufacturing cash flow before pension contributions: $650 million-$750 million (down from previous $900 million-$1 billion).
• Aviation: Total year revenue ~$5.5 billion, segment margin ~11%.
• Bell: Total year revenue unchanged, segment margin 10.5%-11%.
• Systems: Revenue unchanged, segment margin top end of 11%-12%.
• Industrial: Revenues ~$3.5 billion, segment margin ~4%.
• eAviation: Revenue ~$35 million, segment loss ~$75 million.
• Finance: Revenue ~$50 million, segment margin ~$30 million

Risks

• Aviation: Strike impact on production and financial results.
• Supply Chain: Ongoing supply chain issues affecting production efficiency.
• Industrial: Softness in Specialized Vehicles end markets continuing to impact segment.
• Defense Programs: Uncertainties in defense program appropriations and timeline for milestones like CDR in FLRAA program

Question and Answer

• Q: How things are going at Aviation in terms of restarting production and updated forecast?

A: Scott Donnelly says workforce is ramping up, 60% back, focusing on supply chain recovery to get production back on track

• Q: Lower forecast for free cash flow?

A: Frank Connor mentions inventory headwinds from strike ramp-up affecting cash flow

• Q: Headwinds in Industrial and Bell offset?

A: Scott Donnelly discusses Industrial softness continuing and Bell's margin improvement

• Q: Aviation demand and pricing?

A: Scott Donnelly says demand remains favorable, pricing good but price inflation compressing

• Q: Systems programs like FTUAS and RCV?

A: Scott Donnelly states these programs are key to Systems growth in future