Strike, supply chain woes impact Textron Aviation’s Q3
Textron Aviation’s third-quarter revenue remained stable at $1.3bn compared to same period last year while declining on a sequential basis. Higher pricing helped offset the year-over-year decline, but the labor strike negatively impacted both revenue and profit.
As Scott C. Donnell, chairman and CEO of Textron, explained: “In the third quarter, Textron Aviation experienced a strike… The labor disruption adversely impacted our third quarter results and we expect it to negatively affect fourth quarter financials.”
Despite these challenges, the company saw strong demand, securing over $1bn in new orders.
The labor strike and associated manufacturing inefficiencies led to delayed aircraft deliveries. While jet deliveries increased slightly, commercial turboprop deliveries declined.
Textron Aviation delivered 41 jets in the quarter, up from 39 in the third quarter of 2023, and 25 commercial turboprops, down from 38 in last year’s third quarter.
Segment profit also dropped to $128m, down $32m from a year ago, reflecting lower volume and mix of $29m.
Although the strike at the Aviation plant in Wichita disrupted deliveries, Textron used this time to address lagging supplier parts deliveries. This resulted in increased inventory in the third quarter.
Management noted that the final labor agreement was more costly than anticipated, but direct labor only accounts for about 10% of aircraft production costs.
Textron Aviation’s backlog at the end of the third quarter stood at $7.6bn, up from $7.4bn in the second quarter.
Robert Stallard of Vertical Research Partners commented, “We continue to see Textron as a mixed bag. While there are clear positives like FLRAA, other parts of the portfolio are looking more challenged, notably Industrial. Aviation should be in a better place now that the strike has concluded, but the overall market outlook for bizjets appears fairly stable at the moment.”
With one quarter to go, the company has cut its 2024 guidance, with the adjusted EPS range going from $6.20-6.40 to $5.40-5.60. Textron also brought down its manufacturing cashflow forecast from $0.9-1.0bn to $0.65-0.75bn.
Management noted that it expects a return to growth in Aviation next year once the strike is impact is behind.
