UTX - Is It Time to Buy Textron After Last Week's Earnings?
Aerospace and transportation manufacturer Textron (NYSE: TXT) announced quarterly earnings on Oct. 17. Adjusted net earnings rose 56% over the prior year, and operating margins expanded by 140 basis points to 9.1%, while revenue increased 2% year-over-year. However, the company reduced its full-year profit and cash flow guidance, and shares dipped more than 7% in the aftermath.
Before digging into valuation, it's imperative to run some checks on financial health and operational efficiency to uncover potential red flags that might derail any bull narrative.
Textron certainly carries debt, with a 0.68 long-term debt-to-equity ratio, but debt-heavy capital structures are fairly common among large aerospace and industrial manufacturers. While Textron is somewhat higher than the peer group average in this regard, it still falls well within the peer group range. Sufficiently high interest coverage and current ratios help allay any fears of imminent bankruptcy or default risk.