Earnings Call Insights: Textron Inc. (TXT) Q3 2025
Management View
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Scott Donnelly, Chairman, President & CEO, began with the announcement: “Yesterday, we elected Lisa Atherton to become our new President and CEO, effective at the beginning of January. At that point in time, I’ll transition to be the Executive Chair.” Donnelly described Atherton as an “outstanding leader” with significant experience at Textron Systems and Bell, emphasizing continuity and strength in leadership.
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Donnelly stated revenue was higher, driven by “strong growth across our aerospace and defense businesses.” He highlighted Aviation’s increased segment revenues and profit, strong fleet utilization, and a $7.7 billion backlog. Certification milestones were reached for the CJ3 Gen2, M2 Gen2 autothrottles, and new Garmin 5000 avionics features on the Latitude. The company is nearing completion of the Citation Ascend certification and continues to implement Starlink connectivity across 14 aircraft platforms.
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On the defense side, Donnelly noted a partnership with Leonardo on the Beechcraft M-346N for the Navy jet training competition and outlined progress on the MV-75 program: “Bell exceeded their 90% engineering release milestone, enabling continued fabrication and procurement activity for the prototype aircraft.”
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In Systems, Donnelly reported a $1 billion increase in backlog, citing new ATAC awards, a contract for 65 mobile strike force vehicles, and delivery of the first XM204 systems to the U.S. Army. Industrial revenue was lower due to the divestiture of Powersports. Donnelly also confirmed a segment realignment: “Textron will be eliminating the Textron Aviation segment as a separate reporting segment… effective at the beginning of fiscal year 2026.”
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David Rosenberg, Executive VP & CFO: “Revenues at Textron Aviation of $1.5 billion were up 10% or $138 million from the third quarter of 2024… Segment profit was $179 million in the third quarter, up 40% or $51 million from a year ago.”
Outlook
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Rosenberg stated, “We are reiterating our expected full year adjusted earnings per share to be in the range of $6 to $6.20 and maintaining our expected full year manufacturing cash flow before pension contributions to be in the range of $900 million to $1 billion.”
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The company expects its full year adjusted effective tax rate to be approximately 21%.
Financial Results
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Q3 revenues reached $3.6 billion, up $175 million from the prior year. Adjusted income from continuing operations was $1.55 per share compared to $1.40 per share in last year’s third quarter. Manufacturing cash flow before pension contributions totaled $281 million.
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Bell revenues were $1 billion, with a $1.3 billion increase in backlog from the prior quarter, driven by the MV-75 program. Bell’s segment profit was $92 million, down $6 million year-over-year.
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Systems revenues of $307 million were up $6 million, with segment profit of $52 million reflecting a gain from early vendor contract termination. Backlog in Systems rose by $980 million.
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Industrial revenues fell to $761 million due to the Powersports divestiture. eAviation segment revenues were $5 million, with a $15 million segment loss. The Finance segment posted $26 million in revenue and $18 million in profit, driven by noncaptive asset dispositions.
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The company repurchased 2.6 million shares in Q3, returning $206 million to shareholders; year-to-date repurchases total 8.4 million shares and $635 million.
Q&A
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Peter Arment, Baird: Asked about the MV-75 acceleration and cost impact. Donnelly said “it won’t change anything in the near term” and clarified the program is structured to manage future variants and capabilities without changing current cost profiles.
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Sheila Kahyaoglu, Jefferies: Sought an update on the MV-75 program and contract structure. Donnelly explained the program is “mostly cost-plus development. There are some fixed price elements,” and emphasized the “risk of bringing that LRIP in rather than having a big gap is pretty minimal.”
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João Santos, UBS: Asked about long-term Aviation margin targets. Donnelly pointed to volume as the biggest lever for margin improvement and noted positive pricing trends.
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Robert Stallard, Vertical Research: Inquired about the CEO transition. Donnelly said, “She becomes the President and CEO. She’s running the company.”
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Myles Walton, Wolfe Research: Asked about the supply chain and ability to hit a $6.1 billion revenue placeholder. Donnelly acknowledged improvements but said, “there are still some problem children out there,” yet the company feels “good about our path to get there.”
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Additional analyst questions covered topics such as Systems growth inflection, Aviation margin drivers, the unmanned portfolio, portfolio strategy, business jet demand mix, and capacity constraints. Donnelly described demand as “remarkably stable” despite economic noise.
Sentiment Analysis
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Analysts were generally positive but pressed on MV-75 risk, supply chain, and margin drivers, reflecting a slightly positive to neutral tone.
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Management maintained a confident and steady sentiment in both prepared remarks and Q&A, with Donnelly emphasizing, “we feel pretty good about where things are,” and describing demand as “as healthy as we’ve ever seen it.”
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Compared to the previous quarter, both management and analysts’ tone remained steady, with continued focus on execution and risk management.
Quarter-over-Quarter Comparison
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Guidance for adjusted EPS and manufacturing cash flow was reiterated. The tax rate expectation rose to approximately 21% from 20% previously.
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Aviation revenues and profit improved quarter-over-quarter, while Bell revenues and backlog increased, driven by the MV-75 program. Segment realignment was newly announced this quarter.
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Management’s confidence and strategic focus on defense and aviation growth remained consistent. Analysts continued to probe margin sustainability, program risk, and supply chain stability.
Risks and Concerns
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Donnelly cited ongoing supply chain challenges with a “relatively small number of suppliers, but they’re critical suppliers.”
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The company addressed concerns on the MV-75 cost structure and potential LRIP risk, clarifying the predominance of cost-plus development and manageable margin expectations.
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Portfolio realignment and potential further divestitures or acquisitions were acknowledged as ongoing strategic considerations.
Final Takeaway
Textron delivered growth in aerospace and defense, highlighted by a significant leadership transition and robust order backlogs. Guidance for full-year adjusted EPS and cash flow was maintained, with ongoing investment in new aircraft certifications and defense programs. Management emphasized stable demand, continued share repurchases, and proactive risk management as the company enters a new chapter under incoming CEO Lisa Atherton.