Textron Inc. (NYSE:TXT) — This large-cap aerospace and defense industry conglomerate makes Cessna business jets, Bell helicopters and other industrial and military equipment. It also supplies aerospace components to other manufacturers.
Global growth and the new U.S. administration’s stated desire to upgrade military and aerospace equipment should benefit TXT’s military sales. TXT is one of the major suppliers of unmanned aerial systems — an offset to a modest decline in Cessna’s civilian sales. But even Cessna’s sales are likely to benefit from newer upgraded models, and Bell should also do better as the government turns to upgrading its fleet of helicopters.
Before the recent election, Standard & Poor’s forecast that margins in 2016 would move to 11.3%, and 11.7% in 2017 from 11.5% in 2015. Their earnings per share estimate for 2016 is $2.77, up from $2.50 in 2015. They estimate earnings of $2.93 in 2017.
Their price target for Textron is $48, which is 16.4X their 2017 EPS. They keep a dour-star buy rating on the shares of TXT stock, saying in a recent report that the stock is a “compelling value.”
Technically, last week TXT broke from a right triangle and eight-month consolidation. It flashed one of my Super CBR buy signals (proprietary internal system) on Thursday, supported by very high volume. However, the advance was so strong that the MACD indicator jumped to an “overbought” condition on both Thursday and Friday.
High-volume breakouts are often not only the result of new buyers, but are often triggered by shorts covering their positions, and followed by retracements within a brief time. Thus, try to buy TXT stock at $42 or lower with a trading target of $50.
