TEXTRON INC Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Aviation: Reached new 5-year contract with IAM, improved parts flow post-strike, steady customer demand, year-end backlog $7.8 billion (up $676 million from 2023), secured order for 26 multi-engine training systems, Cessna SkyCourier type certified by Transport Canada, 6.3% growth in aftermarket revenues in 2024.
• Bell: FLRAA program drove 13.7% revenue growth in 2024, received follow-on award for FLRAA program, delivered 172 commercial helicopters in 2024.
• Systems: 13.5% segment profit margin, completed Options 3 and 4 of Future Tactical Uncrewed Aircraft System Program, awarded $960 million contract for ship-to-shore connector crafts and $106 million contract for mine sweeping payload delivery systems.
• Industrial: Impacted by soft specialized vehicles markets, ongoing strategic review of PowerSports product line, recorded $53 million pre-tax special charges and $38 million inventory valuation charge in Q4.
• eAviation: Pipistrel delivered 42 aircraft in Q4 2024 and 120 in 2024, granted FAA airworthiness exemption for Velis Electro Trainer, acquired Amazilia Aerospace.

Segment Performance

• Textron Aviation: Q4 revenues $1.3 billion, down $242 million from Q4 2023; segment profit $100 million, down $93 million; backlog ended the quarter at $7.8 billion, up $219 million from prior quarter. Full-year 2025 projected revenues ~$6.1 billion, segment margin 12%-13%.
• Bell: Q4 revenues $1.1 billion, up $58 million from Q4 2023; segment profit $110 million, down $8 million; backlog ended the quarter at $7.5 billion. Full-year 2025 projected revenues ~$4 billion, margin 8.5%-9.5%.
• Textron Systems: Q4 revenues $311 million, down $3 million from Q4 2023; segment profit $42 million, up $7 million from Q4 2023; backlog ended the quarter at $2.6 billion. Full-year 2025 projected revenues ~$1.3 billion, margin 12%-13%.
• Industrial: Q4 revenues $869 million, down $92 million from Q4 2023; segment profit $48 million, down $9 million from Q4 2023. Full-year 2025 projected revenues ~$3.2 billion, margin 4.5%-5.5%.
• eAviation: Q4 revenues $11 million, segment loss $22 million. Full-year 2025 projected revenues $45 million, segment loss $70 million.
• Finance: Q4 revenues $11 million, profit $5 million. Full-year 2025 projected segment profit ~$25 million.

Guidance

• 2025 projected revenues ~$14.7 billion, up 7% from 2024. Adjusted EPS range $6-$6.20. Manufacturing cash flow before pension contributions ~$800 million-$900 million.
• Aviation: 2025 projected revenues ~$6.1 billion, segment margin 12%-13%.
• Bell: 2025 projected revenues ~$4 billion, margin 8.5%-9.5%.
• Systems: 2025 projected revenues ~$1.3 billion, margin 12%-13%.
• Industrial: 2025 projected revenues ~$3.2 billion, margin 4.5%-5.5%.
• eAviation: 2025 projected revenues $45 million, segment loss $70 million.
• Finance: 2025 projected segment profit ~$25 million.

Risks

• Work stoppage at Aviation and challenging end markets in Industrial.
• Uncertainty in military program funding due to continuing resolutions.
• Tariff issues potentially impacting operations in Canada and Mexico.

Q: Sheila Kahyaoglu of Jefferies asked about Aviation guidance and quarterly cadence of jet deliveries.

A: Scott Donnelly responded about ramping up production, workforce stability post-contract agreement, and margin progression through the year.

Q: Peter Arment of Baird inquired about cash flow guidance for 2025.

A: Scott Donnelly mentioned cash flow would progress through the year, with Q4 being lighter due to inventory, and confidence in $800 million-$900 million range.

Q: Robert Stallard of Vertical Research asked about risks and opportunities for Bell in 2025 and demand change post-US election.

A: Scott Donnelly stated Bell's business is mostly backlog-based with minimal downside risk, and no significant demand change post-election.

Q: Noah Poponak of Goldman Sachs questioned cash flow guidance and Bell margin.

A: Frank Connor discussed working capital headwinds and military payment timing, while Scott Donnelly explained Bell margin dilution from FLRAA ramp and commercial deliveries.

Q: Seth Seifman of JPMorgan asked about Bell's Q4 shortfall and Aviation order composition.

A: Scott Donnelly mentioned FLRAA program adjustments causing Q4 dilution, and Aviation orders being relatively steady with NetJets and retail composition.

Q: Myles Walton of Wolfe Research inquired about R&D underrun in 2024 and Systems program sensitivity.

A: Scott Donnelly said R&D is stable at $500 million, and Systems programs have minimal impact on 2025 outlook.

Q: David Strauss of Barclays asked about Aviation revenue shortfall and supply chain ramp.

A: Scott Donnelly attributed revenue shortfall to strike-related production loss, and confidence in supply chain and workforce for 2025 ramp.

Q: Ron Epstein of Bank of America asked about private aviation tailwinds and Scorpion 2.0 opportunities.

A: Scott Donnelly mentioned positive business climate for private aviation and ongoing acquisition reform discussions.

Q: Gavin Parsons of UBS asked about Aviation margin impact and net price performance.

A: Scott Donnelly said margin improvement in 2025 is due to better factory performance, not net price changes.

Q: Pete Skibitski of Alembic Global asked about continuing resolution impact on military programs and tariff issues.

A: Scott Donnelly stated continuing resolution has minimal impact so far, and tariff issues are uncertain but being monitored.