On Thursday, Textron Inc . (NYSE:TXT) shares experienced a revision in its financial outlook as Jefferies, a prominent financial services company, adjusted the price target for the firm's shares. The new target has been set at $95.00, a decrease from the previous target of $100.00.
Despite this change, Jefferies sustained a Buy rating on Textron's stock. Trading at $76.11, the stock appears undervalued according to InvestingPro analysis, with analyst targets ranging from $79 to $118.
The price target adjustment comes as Textron announces an indefinite pause in production and the exploration of strategic alternatives for its Powersports line within the Industrial segment's TSV business.
The decision has led to an increase in restructuring charges, now estimated to be between $190 million and $205 million, which were recorded in the fourth quarter. InvestingPro data shows the company maintains strong financial health with a current ratio of 1.83, indicating sufficient liquid assets to cover short-term obligations.
Moreover, Textron is expected to incur a $30 million to $40 million inventory writedown charge, which will impact adjusted earnings per share (EPS) by approximately 12 to 16 cents. This charge is directly related to the Powersports business. Furthermore, the company anticipates cash outlays of $25 million to $35 million in the first half of 2025 to finalize the termination of Powersports production.
In light of these developments, Jefferies has revised its earnings per share (EPS) estimate for Textron in 2024 downward by 15 cents, bringing it to $5.40, which is below the consensus estimate of $5.53.
The firm's free cash flow (FCF) forecast for 2025 has also been reduced by $41 million to a new total of $834 million, compared to the consensus estimate of $958 million. These financial adjustments reflect the immediate impacts of Textron's operational changes on its future financial performance.
In other recent news, Textron Inc. has announced an indefinite pause in its powersports production due to softening consumer demand. This decision has led to an increase in restructuring costs, from the previously estimated $165 million - $170 million to a new range of $190 million - $205 million.
Moreover, Textron anticipates an inventory valuation charge of $30 million - $40 million due to the production pause, which is expected to decrease the company's adjusted earnings per share for 2024 by approximately $0.12 to $0.16.
The earnings per share (EPS) forecast for 2024 has been revised downwards by 13% to a new range of $5.40 to $5.60. This revision was influenced by setbacks in the Aviation and Industrial sectors, slightly offset by growth in the Bell division. Investment firm Baird has reduced its price targets for Textron shares to $100, while UBS has reduced the company's price target to $79.
Despite these challenges, Textron's Bell segment showcased growth with revenues increasing to $929 million, attributed to the progression of the FLRAA program. However, the Industrial revenues saw a decline due to lower demand in Specialized Vehicles. These are some of the recent developments in the company.
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