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Textron Inc Stock Upgraded (TXT)

NEW YORK (TheStreet) -- Textron (NYSE:TXT) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth, compelling growth in net income, notable return on equity and increase in stock price during the past year. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 2.8%. Since the same quarter one year prior, revenues rose by 15.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • TEXTRON INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, TEXTRON INC increased its bottom line by earning $0.78 versus $0.29 in the prior year. This year, the market expects an improvement in earnings ($1.92 versus $0.78).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Aerospace & Defense industry. The net income increased by 306.9% when compared to the same quarter one year prior, rising from $29.00 million to $118.00 million.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. In comparison to the other companies in the Aerospace & Defense industry and the overall market, TEXTRON INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • After a year of stock price fluctuations, the net result is that TXT's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
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Textron Inc. operates in the aircraft, defense, industrial, and finance businesses worldwide. Its Cessna segment manufactures business jets, single engine utility turboprops, single engine piston aircraft, lift solutions, and parts, as well as maintenance, inspection, and repair services. The company has a P/E ratio of 35, above the average aerospace/defense industry P/E ratio of 34.2 and above the S&P 500 P/E ratio of 17.7. Textron has a market cap of $7.56 billion and is part of the industrial goods sector and aerospace/defense industry. Shares are up 44.1% year to date as of the close of trading on Thursday.

You can view the full Textron Ratings Report or get investment ideas from our investment research center.
-- Written by a member of TheStreet RatingsStaff

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