Textron Earnings Call: Record Results, MV-75 Trade-offs

Textron ((TXT)) has held its Q4 earnings call. Read on for the main highlights of the call.

Textron Charts Record Year but Flags Pockets of Pressure in Earnings Call

Textron’s latest earnings call painted a largely upbeat picture, with management emphasizing record annual revenue, robust segment profit growth, expanding backlogs, and strong cash generation. Executives acknowledged clear headwinds—from a weak industrial segment and supply‑chain bottlenecks to low-margin MV‑75 ramp-up costs and persistent eAviation losses—but argued these are manageable against a backdrop of healthy demand, disciplined execution, and constructive guidance into 2026. Overall, the tone was confident, with management framing today’s pressures as investments that should support higher growth and margin expansion over the next several years.

Record Quarterly and Full-Year Revenue Growth

Textron delivered a standout top-line performance in both the quarter and the full year. Fourth-quarter revenue climbed 16% year over year to $4.2 billion, while full-year revenue rose 8% to $14.8 billion, the highest in the company’s history. Management highlighted broad-based growth across core aerospace and defense businesses, driven by increased deliveries and strong aftermarket demand. The results underscore Textron’s ability to convert its hefty backlog into revenue even amid supply-chain and labor constraints, with leadership stressing that demand remains resilient across key end markets.

Profitability Momentum and EPS Upside

Profitability accelerated faster than revenue. Segment profit in the fourth quarter jumped 34% to $380 million, while full-year segment profit rose 14% to $1.4 billion. Adjusted EPS reached $1.73 in the quarter, up from $1.34 a year earlier, and $6.10 for the year versus $5.48 previously. Management attributed the gains to improved mix, higher volumes in aviation and defense, and ongoing cost discipline, partially offset by margin pressure at Bell and ongoing losses at eAviation. The EPS trajectory, together with guidance, signals management’s confidence in continued operating leverage even as they ramp big, capital-intensive programs.

Textron Aviation’s Strong Flight Path

Textron Aviation was a clear standout. Fourth-quarter revenue surged 36% to $1.7 billion, driven by roughly $400 million of higher aircraft revenues and a $67 million lift in aftermarket sales. Segment profit doubled to $208 million, while full-year aviation revenue climbed 13% to $6.0 billion and segment profit increased 23% to $694 million. Deliveries rose to 171 jets (from 151) and 146 commercial turboprops (from 127), with aftermarket revenue up about 6% for the year. The aviation backlog ended at $7.7 billion, giving management visibility into 2026 even as they noted that aviation orders over the last 12 months were down around 3%, a nuance investors will watch closely for any shift in demand cadence.

Bell’s Revenue Growth Meets Margin Headwinds

Bell posted solid growth but faced margin pressure. Fourth-quarter revenue at the helicopter unit rose 11% to $1.3 billion, and full-year revenue increased 20% to $4.3 billion, supported by rising commercial deliveries—169 helicopters in 2025 versus 102 in 2024—and a backlog that grew to $7.8 billion, up more than $300 million. Despite this volume strength, segment profit slipped, with Q4 profit down $9 million year over year to $101 million and full-year profit also lower by $7 million. Management cited low single-digit booking margins on the MV‑75 program and the early-stage cost profile of the LRIP ramp as key drivers, cautioning that Bell’s margins will remain under pressure as the program scales.

MV-75 Ramp: Aggressive Buildout, Near-Term Cost Drag

The MV‑75 program was a central theme, with Textron emphasizing both its strategic importance and near-term financial drag. Management reported that over 90% of engineering drawings are complete, nearly 2,000 tier‑1 and tier‑2 suppliers are under contract, and roughly 45,000 purchase orders have been issued. New capacity is in place, including fuselage manufacturing in Wichita and centers in Fort Worth, and components for the first six aircraft are underway—effectively pulling production forward by more than two years versus the original plan. While the program is expected to be profitable over time, the company flagged that current booking margins are in the low single digits, and the early LRIP phase will compress Bell’s margins until volumes and learning-curve benefits take hold.

Textron Systems: Steady Growth and Contract Momentum

Textron Systems delivered modest revenue growth but strong backlog expansion. Fourth-quarter revenue in the Systems segment grew 4% to $323 million, with segment profit of $43 million. The real story was the order book: full-year Systems backlog expanded by $700 million to $3.3 billion. Management highlighted ongoing scaling of the Ship to Shore Connector program—now around 15 of 73 units, supporting more than $450 million in awards—as well as the ATAC IDIQ contract worth about $200 million. These wins underpin steady medium-term growth and provide a buffer against program-specific volatility elsewhere in the portfolio.

Robust Cash Generation and Active Share Repurchases

Cash generation remained a strength and supported shareholder returns. Manufacturing cash flow before pension contributions came in at $510 million in the fourth quarter, up $204 million year over year, and $969 million for the full year, an increase of $277 million. Textron used a significant portion of this cash to buy back stock, repurchasing about 2.3 million shares for $107 million in Q4 and roughly 10.7 million shares for $822 million over the full year. While elevated capital spending is expected as MV‑75 ramps, management signaled ongoing commitment to returning capital where cash flows allow.

Industrial Segment Remains a Drag

In contrast to the aerospace and defense units, the Industrial segment struggled. Fourth-quarter Industrial revenue fell $48 million to $821 million, and full-year revenue declined 9% to $3.2 billion, or 4% lower on an organic basis. Segment profit dropped by $18 million in Q4 to $30 million and fell $6 million for the year to $145 million. Management attributed the weakness to softer demand and ongoing margin pressure, while suggesting that low-single-digit organic growth and modest margin improvement are possible ahead. Still, Industrial remains a clear laggard and a source of earnings volatility relative to the higher-performing aviation and defense businesses.

Bell Margin Pressure and MV-75 Risk Overhang

Beyond the current low margins on MV‑75, Textron flagged a potential future accounting hit related to the program. The company expects that once the LRIP award is finalized—currently anticipated around late 2026 or early 2027—it may have to record an unfavorable cumulative catch-up adjustment in the range of $60 million to $110 million. This potential charge is not included in current guidance, and management stressed the program should still be profitable over time. However, investors should be aware that even as MV‑75 expands Textron’s long-term growth and defense profile, it introduces tangible earnings and margin risk in the latter part of the current planning horizon.

Supply-Chain, Workforce, and Production Constraints

Management acknowledged that supply-chain and labor challenges remain a meaningful headwind, particularly around engine availability and factory efficiency. While they noted moderate improvement versus 2025, workforce attrition and parts delays continue to limit throughput and productivity, especially in Textron Aviation. The company has taken steps to stabilize the supply base and adjust operations, but leadership was clear that these issues will not disappear overnight. For investors, this means that delivery timing, mix, and execution efficiency will remain key variables in the earnings trajectory.

eAviation: Small Revenue, Ongoing Losses, Strategic Realignment

Textron’s eAviation segment remains a small but loss-making operation. Q4 revenue was just $7 million, down from $11 million in the prior-year quarter, while the segment posted a $15 million loss—an improvement from a $22 million loss a year earlier. For the full year, eAviation generated $27 million in revenue and recorded a $63 million segment loss. Management plans to realign this business across other segments, signaling a shift in how Textron will report and likely manage its electric and future-flight initiatives. The move suggests a desire to keep investing in advanced technologies while reducing the visibility of near-term losses.

Inventory, LIFO Charges, and Non-Operational Headwinds

Non-operational items also weighed on reported results and guidance. In the fourth quarter, Textron booked an $84 million LIFO inventory provision, and its 2026 outlook assumes a sizable $200 million LIFO provision, reflecting the impact of cost inflation embedded in inventory. Corporate and financing items are also stepping up, with net interest for manufacturing expected to be about $140 million and planned capital expenditures jumping to about $650 million in 2026, up roughly $383 million year over year, largely to support MV‑75 LRIP preparation and long-lead materials. These factors, while not reflective of underlying demand, will influence reported earnings and cash flows and are important for investors building models.

Aviation Order Cadence and Backlog Conversion

One subtle but important datapoint was management’s comment that aviation orders were down roughly 3% over the last 12 months, even as the company guides to higher aviation revenue in 2026. With a $7.7 billion backlog in Textron Aviation and robust deliveries, the company has ample runway to support near-term growth. However, the slight order decline raises questions around business jet and turboprop demand sustainability if macro conditions soften. Management is effectively betting on continued solid conversion of existing backlog, while investors will be watching order trends closely as a forward indicator beyond 2026.

Guidance and Outlook: Continued Growth with Manageable Risks

Textron’s 2026 guidance points to continued, if more moderate, growth. The company targets revenue of about $15.5 billion, up roughly 4.5% from 2025’s $14.8 billion, with adjusted EPS between $6.40 and $6.60 and manufacturing cash flow before pension contributions of $700–$800 million. Capital expenditures are expected around $650 million, including approximately $350 million of incremental spending and long-lead material tied to MV‑75 LRIP, while R&D is projected at about $480 million, down from $521 million. Segment outlooks include Textron Aviation revenue of around $6.5 billion (up about 9%) with margins of 11–12%, Bell at roughly $4.4 billion with 8–9% margins (excluding the potential MV‑75 catch-up adjustment), Systems at about $1.35 billion with 12–13% margins, and Industrial at roughly $3.2 billion with low-single-digit organic growth and 4.5–5.5% margins. Corporate items assume elevated LIFO provisions, higher net interest, and an adjusted tax rate around 20.5%. Overall, the guidance suggests steady top-line growth, improved profitability in aviation and systems, and a disciplined approach to funding the MV‑75 ramp.

In sum, Textron’s earnings call showcased a company in the midst of a profitable growth phase, powered by record aviation and defense performance, solid cash generation, and a growing backlog across key franchises. Offsetting these positives are a weak Industrial segment, compressed Bell margins, and known future risks around MV‑75 accounting and ongoing supply-chain constraints. For investors, the story is one of constructive momentum with clearly defined pain points: Textron appears willing to absorb near-term cost and complexity today to secure higher, more durable earnings power in the years ahead.