Trade-Ideas: Textron (TXT) Is Today's

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer.

Trade-Ideas LLC identified Textron ( TXT) as a "barbarian at the gate" (strong stocks crossing above resistance with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Textron as such a stock due to the following factors:

  • TXT has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $39.3 million.
  • TXT has traded 822,331 shares today.
  • TXT traded in a range 247.7% of the normal price range with a price range of $1.41.
  • TXT traded above its daily resistance level (quality: 13 days, meaning that the stock is crossing a resistance level set by the last 13 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Barbarian at the Gate' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying positive price action. In this case, the stock crossed an important inflection point; namely, 'resistance' while at the same time the range of the stock's movement in price is more than twice its normal size. This large range foreshadows a possible continuation as the stock moves higher.

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More details on TXT:

Textron Inc. operates in the aircraft, defense, industrial, and finance businesses worldwide. It operates through five segments: Textron Aviation, Bell, Textron Systems, Industrial, and Finance. The stock currently has a dividend yield of 0.2%. TXT has a PE ratio of 19. Currently there are 8 analysts that rate Textron a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for Textron has been 1.6 million shares per day over the past 30 days. Textron has a market cap of $12.4 billion and is part of the industrial goods sector and aerospace/defense industry. The stock has a beta of 1.45 and a short float of 2.1% with 5.84 days to cover. Shares are up 5.8% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Textron as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance, impressive record of earnings per share growth and compelling growth in net income. We feel its strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:
  • TXT's revenue growth has slightly outpaced the industry average of 3.4%. Since the same quarter one year prior, revenues slightly increased by 7.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The debt-to-equity ratio is somewhat low, currently at 0.88, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
  • TEXTRON INC has improved earnings per share by 48.4% 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 $2.15 versus $1.75 in the prior year. This year, the market expects an improvement in earnings ($2.48 versus $2.15).
  • 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 50.6% when compared to the same quarter one year prior, rising from $85.00 million to $128.00 million.

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