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TI

TEXTRON INC (TXT)·Q3 2026 Earnings Summary

Executive Summary

  • Textron reported Q3 2026 results (quarter ended September 27, 2025): revenue $3.60B, GAAP diluted EPS $1.31, and adjusted EPS $1.55, with year-over-year revenue up 5% and adjusted EPS up from $1.40; segment strength came from Aviation and Bell, while Industrial declined due to the Powersports divestiture .
  • Against Wall Street consensus, Textron missed on both EPS and revenue: consensus EPS was $1.80* vs actual $1.31 GAAP/$1.55 adjusted, and consensus revenue was $3.86B* vs $3.60B; misses reflect lower Bell commercial volume and Industrial headwinds despite strong military and Aviation deliveries .
  • Guidance: FY 2025 adjusted EPS reiterated at $6.00–$6.20 and GAAP EPS $5.19–$5.39; manufacturing cash flow before pension contributions raised vs Q1 to $900M–$1.0B; adjusted effective tax rate raised from ~18% in Q1 to ~21% in Q3 .
  • Strategic/catalyst: Leadership transition announced—Lisa Atherton (Bell CEO) named Textron CEO effective January 4, 2026; Bell president & CEO successor announced; MV-75 (FLRAA) program acceleration continues, bolstering backlog and defense exposure .

Note: Values with asterisks are consensus estimates retrieved from S&P Global.

What Went Well and What Went Wrong

What Went Well

  • Aviation execution: 42 jets and 39 turboprops delivered; segment profit up $51M YoY to $179M on higher volume/mix; backlog steady at $7.7B .
  • Defense momentum: Bell revenue up 10% YoY on higher MV-75 volume; Bell backlog rose to $8.2B (+$1.3B QoQ) on prototype testing/evaluation award; Systems backlog up ~$980M QoQ on awards (ATAC, Ship-to-Shore Connector, land vehicles) .
  • Management tone on MV-75: “We… believe [LRIP acceleration] is something that we can do with low risk… by the time we are building that first LRIP aircraft… we will have built… eight aircraft” (EMD+LUT), indicating program confidence and execution continuity .

What Went Wrong

  • Bell commercial softness: Bell delivered 30 commercial helicopters vs 44 YoY; segment profit down $6M YoY as higher R&D and lower commercial volume offset military strength .
  • Industrial decline: Revenues down $79M YoY largely from Powersports divestiture ($88M lower revenues) and golf product volume; segment profit flat at $31M .
  • Below-consensus prints: EPS (GAAP and adjusted) and revenue missed Street expectations, suggesting estimates may need downward revisions for near-term quarters given supply chain constraints and mix effects noted on the call .

Financial Results

MetricQ3 2024Q2 2025Q3 2026
Revenue ($USD Billions)$3.43 $3.72 $3.60
GAAP Diluted EPS ($)$1.18 $1.35 $1.31
Adjusted Diluted EPS ($)$1.40 $1.55 $1.55
Gross Margin % (Manufacturing)17.7% 18.8% 17.6%

Actual vs Estimates (Q3 2026):

MetricActualConsensusDelta
Revenue ($USD Billions)$3.60 $3.86*-$0.26B
GAAP Diluted EPS ($)$1.31 $1.80*-$0.49
Adjusted Diluted EPS ($)$1.55 $1.80*-$0.25

Note: Values with asterisks are consensus estimates retrieved from S&P Global.

Segment Revenues ($USD Millions):

SegmentQ3 2024Q2 2025Q3 2026
Textron Aviation$1,339 $1,517 $1,477
Bell$929 $1,016 $1,026
Textron Systems$301 $321 $307
Industrial$840 $839 $761
Textron eAviation$6 $8 $5
Finance$12 $15 $26
Total$3,427 $3,716 $3,602

KPIs and Cash Flow:

KPIQ2 2025Q3 2026
Aviation deliveries (jets) (units)49 42
Aviation deliveries (turboprops) (units)34 39
Bell commercial helicopters delivered (units)32 30
Aviation backlog ($USD Billions)$7.85 $7.7
Bell backlog ($USD Billions)$6.88 $8.2
Systems backlog ($USD Billions)$2.19 $3.2
Manufacturing cash flow before pension ($USD Millions)$281 $281
Net cash from operating activities ($USD Millions)$348 (Manufacturing) $349 (Consolidated)
Share repurchases ($USD Millions)$214 in Q2 $206 in Q3

Non-GAAP adjustments (Q3 2026):

  • LIFO inventory provision $48M and $0.20 per share; intangible amortization $8M and $0.04 per share; special charges negligible; adjusted EPS reconciled to $1.55 .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
GAAP EPS (Continuing Ops)FY 2025Not specified in Q1$5.19–$5.39 —
Adjusted EPSFY 2025$6.00–$6.20 $6.00–$6.20 Maintained
Manufacturing cash flow before pension contributionsFY 2025$800M–$900M $900M–$1,000M Raised
Adjusted effective tax rateFY 2025~18% ~21% Raised

Dividends: $4M paid in Q3 2026; no change to dividend policy disclosed .

Earnings Call Themes & Trends

TopicQ1 2025 (Prior-2)Q2 2025 (Prior-1)Q3 2026 (Current)Trend
MV-75 (FLRAA) accelerationBell revenue up; program ramp; strong demand Bell up 28% YoY; acceleration; engineering release milestone; backlog solid Continued acceleration; LRIP pull-forward viewed low-risk; backlog +$1.3B QoQ Strengthening execution and backlog
Aviation margins & deliveriesAftermarket strength; mixed deliveries; backlog $7.9B Mixed margin; supply chain constraints but path to $6.1B revenue maintained Higher deliveries; margin progression expected into Q4 on volume Improving with volume
Supply chainGeneral challenges noted Critical suppliers “hand-to-mouth”; improving but still issues Continued constraints; manageable; not derailing targets Gradual improvement
Industrial restructuring/dispositionsPowersports divestiture contemplated Powersports sale; restructuring at Systems Industrial revenue decline YoY tied to divestiture; profit stable Portfolio pruning; stabilizing margins
Portfolio/leadershipStable segments; ongoing review —CEO transition to Lisa Atherton; portfolio review ongoing Governance catalyst

Management Commentary

  • “Overall, third quarter revenue was up 5% for Textron with higher revenues at Aviation, Bell, and Textron Systems” (Scott Donnelly) .
  • “Bell exceeded their 90% engineering release milestone… enabling continued fabrication and procurement activity for the prototype aircraft” .
  • On MV-75 LRIP risk: “We… believe this is something that we can do with low risk… by the time we are building that first LRIP aircraft… we will have built… eight aircraft… certainly, there’s an enormous amount of… testing” .
  • On Aviation demand and aftermarket: “Utilization is strong. People are flying… bookings remain strong… Starlink now available on 14 platforms” .
  • On supply chain: “There are still some problem children… overall, it’s improved… we clearly feel good about our path” .

Q&A Highlights

  • MV-75 acceleration and concurrency risk: Management reiterated low-risk acceleration with LRIP pulled forward given extensive prototype/build history and testing cadence .
  • Aviation margin inflection: Q4 margin uplift driven by expected volume, improved flow despite ongoing supply chain constraints .
  • Systems growth inflection: Strong ATAC, Ship-to-Shore Connector, Sentinel and ISR positioning despite program restructuring; backlog growth supports forward trajectory .
  • Portfolio evaluation: Ongoing review; recent Powersports sale; leadership transition expected to be smooth with continued strategic discipline .
  • Tax rate guidance: Adjusted effective tax rate now ~21% for FY 2025 vs prior ~18% due to legislative changes .

Estimates Context

  • Q3 2026 results missed consensus: EPS $1.31 GAAP/$1.55 adjusted vs $1.80*; revenue $3.60B vs $3.86B*, driven by lower Bell commercial deliveries and Industrial divestiture headwinds, partly offset by MV-75 military strength and Aviation deliveries .
  • Expect near-term estimate recalibration: Bell commercial mix and Industrial run-rate imply tempered top-line, while defense backlog and Q4 Aviation volume may support margin into year-end .

Note: Values with asterisks are consensus estimates retrieved from S&P Global.

Key Takeaways for Investors

  • Defense-driven backlog is a clear positive: Bell backlog +$1.3B QoQ to $8.2B and Systems +$0.98B QoQ underpin forward visibility and resilience anchored by MV-75 execution .
  • Aviation volume/mix is improving; watch Q4 margin delivery: Q3 deliveries rose and management guides margin progression on higher Q4 volume despite supply chain friction .
  • Industrial headwinds likely persist near term post-divestiture; restructuring benefits help protect profitability .
  • Guidance is intact on EPS and raised on cash flow; tax rate headwind (to ~21%) offsets some upside—model accordingly .
  • Leadership transition to Lisa Atherton is a governance catalyst with direct MV-75 experience—could accelerate defense execution and investor confidence .
  • Near-term trading setup: Print below consensus may cap immediate upside; defense backlog and Q4 Aviation volume are supports; monitor MV-75 milestones and supply chain updates .
  • Medium-term thesis: Balanced exposure to business jets and defense tiltrotor with improving program visibility; continued buybacks ($206M in Q3) and raised cash flow guidance bolster capital returns .

Additional Data and Notes

  • Cash flow reconciliation: Manufacturing cash flow before pension contributions $281M; net operating cash flow $349M; sustained buybacks year-to-date $635M .
  • Non-GAAP recon: LIFO and intangibles add $0.24/share; adjusted EPS $1.55; gross margin % down sequentially (18.8% → 17.6%) on mix .
  • Other press releases: Bell CEO transition announced; supplier ecosystem developments (e.g., MV-75 inverter award to Marotta Controls) support program maturity .

Note: Values with asterisks are consensus estimates retrieved from S&P Global.