Understanding Textron Inc.'s (NYSE:TXT) performance as a company requires examining more than earnings from one point in time. Today I will take you through a basic sense check to gain perspective on how Textron is doing by evaluating its latest earnings with its longer term trend as well as its industry peers' performance over the same period.
Have TXT's earnings improved against past performances and the industry?
TXT's trailing twelve-month earnings (from 28 September 2019) of US$862m has declined by -0.4% compared to the previous year.
Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 9.5%, indicating the rate at which TXT is growing has slowed down. Why could this be happening? Let's examine what's transpiring with margins and whether the entire industry is experiencing the hit as well.
In terms of returns from investment, Textron has fallen short of achieving a 20% return on equity (ROE), recording 16% instead. However, its return on assets (ROA) of 6.7% exceeds the US Aerospace & Defense industry of 6.4%, indicating Textron has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Textron’s debt level, has increased over the past 3 years from 9.9% to 11%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 87% to 75% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that are profitable, but have capricious earnings, can have many factors affecting its business. I suggest you continue to research Textron to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for TXT’s future growth? Take a look at our free research report of analyst consensus for TXT’s outlook.
- Financial Health: Are TXT’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 28 September 2019. This may not be consistent with full year annual report figures.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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