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Textron 3Q profit plunges on weak markets

Textron Inc. said Tuesday its third-quarter profit plunged 98 percent as the company continues to face reduced sales at its corporate jet and helicopter businesses.
/ Source: The Associated Press

Textron Inc. said Tuesday its third-quarter profit plunged 98 percent as the company continues to face reduced sales at its corporate jet and helicopter businesses.

Scott Donnelly, the company's president and CEO-elect, said in a statement that demand for Textron's products "continues to show signs of stabilization," but recovery "likely will be slow and modest."

In addition to the downturn in business jets, Textron had significant problems when capital markets locked up last year. Its finance arm, which makes loans to buyers of new and used Cessna business jets, golf courses and vacation-resort developments, was hard hit and is struggling to recover.

The Providence, R.I., company which also makes Bell helicopters and EZ-Go golf carts, said its profit fell to $4 million, or 1 cent per share, for the period ended Oct. 3, down sharply from $206 million, or 83 cents per share, a year ago. It earned 2 cents per share from continuing operations, however, topping the average estimate of analysts surveyed by Thomson Reuters, who had expected a loss of 3 cents per share.

Revenue remained under pressure, falling 27 percent, to $2.55 billion. But that also bested Wall Street's average forecast of $2.52 billion.

The company's profit and revenue results surprised investors, sending Textron shares climbing. The stock closed at $19.67, up 7 percent or $1.31 on the day.

Textron has continued to see a steep fall in business-jet orders. The company said it delivered 68 Citation jets in the third quarter of 2009, compared with 124 jets a year earlier. Cessna backlog at the end of the third quarter was $6.9 billion, a decline of $1.3 billion from the second quarter. Cessna revenue fell 42 percent, to $825 million from $1.42 billion in last year's third quarter.

Textron said it now expects full-year restructuring charges of about $240 million to eliminate more overhead and consolidate facilities, up from a company estimate in July of about $200 million. That was an increase from a previous estimate of $75 million.

The company had said it would cut 1,300 Cessna jobs this summer, in addition to 6,900 workers who were previously laid off. Cessna, which has reduced its work force by half since November 2008, has said it will curtail production of Cessna jets this year as customers cancel or defer orders.

Textron said it expects full-year earnings, excluding special charges, will be in the upper end of its previous guidance of 33 cents per share to 63 cents per share on revenue of about $10.6 billion.

Analysts, who sometimes exclude certain items from their estimates, expect Textron to post a loss of 6 cents per share on revenue of $10.3 billion.

Textron spokesman Michael Maynard said Textron's outlook is for continuing operations that exclude special charges and analysts include the charges in their estimates.

Standard & Poor's analyst Richard Tortoriello reiterated a "Buy" rating of Textron. He said he sees Textron "making good progress" on restructuring debt, cash flow and operating efficiency and profit margins.

Tortoriello raised his price target to $25 from $22 on an improved outlook.