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Why Textron Stock Popped 15.7% in January

Steve Symington, The Motley Fool

What happened

Shares of Textron (NYSE: TXT) climbed 15.7% in January, according to data from S&P Global Market Intelligence, after the industrial conglomerate announced strong fourth-quarter 2018 results

More specifically, after drifting higher along with the broader market for most of last month, Textron stock popped nearly 6% on Jan. 24 alone, the same day its quarterly report hit the wires.

A Bell commercial helicopter

IMAGE SOURCE: TEXTRON.

So what

It probably helped that Textron stock had only just plunged 18% in  December despite a lack of company-specific news. But its Q3 report held plenty of encouragement for investors.

On one hand, quarterly revenue declined 6.6% year over year to $3.75 billion, as solid growth from Textron's Aviation business was offset by a combination of the divestment of its Tools & Test product line and weakness from specialized vehicles within the Industrial segment, as well as lower military volume from its Bell and Textron Systems segments. On the other hand, Textron's adjusted net income from continuing operations climbed more than 40% to $279 million and, thanks to share repurchases over the past year, rose an even better 55% on a per-share basis to $1.15. The latter brought Textron's full-year adjusted earnings to $3.34 per share, up from $2.45 in 2017 and well above its own outlook for a range of $3.20 to $3.30. 

Textron CEO Scott Donnelly lauded the company's "strong execution" and margin improvements driven by operating leverage and new products at each of its Aviation, Bell, and Systems businesses.

Now what

What's more, while Textron is expecting revenue this year to be roughly flat from 2018, it's also targeting 2019 earnings from continuing operations of $3.55 to $3.75 per share, up 9.3% at the midpoint and comfortably ahead of the $3.49 per share most analysts were anticipating.

"As we look to the future, we are investing for long-term growth to generate increases in shareholder value," Donnelly added.

Indeed, considering Textron is already able to leverage healthy bottom-line growth even as sales remain flat, the company should be well positioned for outsize profits once it's able to return to sustained top-line gains in time. As such, it was hard to blame the market for bidding up Textron stock in response last month.

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Steve Symington has no position in any of the stocks mentioned. The Motley Fool recommends Textron. The Motley Fool has a disclosure policy.