January 31, 2018 / 11:52 AM / 19 days ago

Textron profit misses estimates as weak aviation margins weigh

(Reuters) - Textron Inc’s (TXT.N) fourth-quarter adjusted profit missed Wall Street estimates as higher research and development expenses hurt margins in its aviation business, sending the company’s shares down as much as 4 percent.

The Cessna aircraft and Bell Helicopter maker forecast flat gross R&D costs of $620 million for 2018, but it was higher than some analysts were expecting.

“It’s not like R&D spending is going away,” Chief Executive Scott Donnelly said on a post-earnings conference call with analysts.

The Providence, Rhode Island-based company, which is looking to boost its aircraft sales, said it was gearing up to certify its new Citation Longitude super mid-size business jet in the current quarter.

Longitude has a maximum cruise speed of 882 kilometer per hour and can seat up to 12 passengers. The aircraft competes with General Dynamics’ (GD.N) Gulfstream G280 and Bombardier’s (BBDb.TO) Challenger 350.

The company would also be supporting flight test programs in 2018 of upcoming aircraft including the Bell 525 Relentless helicopter and the Bell V-280 Valor tiltrotor aircraft, as development costs for its Scorpion military jet wind down.

Donnelly said the company has seen a rebound in business jet demand over the last three months, but remains cautious until positive economic sentiment leads to orders at a “fair price”.

Textron’s sales in its aviation business fell 3 percent to $1.39 billion in the quarter ended Dec. 30.

The company forecast 2018 revenue of $14.6 billion, below Wall Street’s expectation of $14.79 billion, according to Thomson Reuters I/B/E/S. However, its earnings per share forecast range of $2.95 to $3.15 was largely above estimates of $3.01.

    The company reported a net loss of $106 million, or 40 cents per share, compared with a profit of $214 million, or 78 cents per share, a year earlier.

    Textron recorded charges of $1.14 per share related to restructuring and changes in the U.S. tax code.

    On an adjusted basis, Textron earned 74 cents per share, lower than the 77 cents expected by Wall Street.

    Total revenue rose 5 percent to $4.02 billion, but was below analysts’ expectation of $4.12 billion.

    The company’s shares were down 2.1 percent at $58.87 in late morning trade. They touched a low of $57.87 earlier.

    Up to Tuesday's close, the stock had risen about 27 percent in the past 12 months, compared with a 23.7 percent increase in the S&P 500 index .SPX.

    Reporting by Ankit Ajmera in Bengaluru; Editing by Maju Samuel

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