A recovery in the business jet market will likely come after an overall economic recovery, according to a J.P. Morgan analyst, and electrical equipment company, Textron ( TXT), is a case in point.

The company could see below average earnings leverage compared with other companies in the sector, analyst Don MacDougall believes. And since business jets account for 30% of Textron's revenue, MacDougall downgraded the company to underweight from neutral on Wednesday. It will be difficult for the company to overcome the economy's lag, he said. "Business jet weakness offsets a better industrial economy."

MacDougall lowered his 2004 jet forecast to 150 jets from 160 jets. But his 2003 expectation remains at 170 jets, below the company's 180 jets to 195 jets guidance.

On the upside, the analyst said he thinks Textron, and other industrial businesses, could make progress through cost-cutting plans that could lead to an operating advantage as the economy improves. But, MacDougall said, the company may underperform relative to peers.

Shares of Textron were dropping 1.8% in afternoon trading to $35.88.

"Given the current state of the economy, this is the first cycle when Textron will be entering an economic recovery with business jets lagging the rest of the economy. Combined with our view that EPS estimates continue to have a downside basis, we do not find valuation compelling," MacDougall said.

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