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Management View

• Executive Chairman Scott Donnelly stated that Textron closed out the year with “significant revenue growth of 16% and segment profit growth of 34%, resulting in an adjusted EPS of $1.73.” He highlighted the Aviation segment’s 36% revenue growth for the quarter and 13% for the full year, driven by higher aircraft deliveries and increased aftermarket volume following the late-2024 strike recovery. Donnelly underscored strong order flow and customer demand, ending the year with a $7.7 billion backlog and delivering 171 jets and 146 commercial turboprops in 2025.
• Donnelly also pointed to Bell’s “very strong year with revenue up 11% for the fourth quarter and 20% for the full year,” and emphasized the acceleration of the MV-75 program, noting, “We’ve completed over 90% of the engineering drawings, put nearly 2,000 Tier 1 and Tier 2 suppliers on contract, issuing 45,000 purchase orders, opened new manufacturing capacity… and we’ve begun manufacturing components for the first 6 aircraft.”
• CEO Lisa Atherton introduced herself and expressed optimism about Textron’s trajectory, citing a “very strong year for Aviation” and highlighting the Denali program, which “finished the year having logged over 3,200 hours of flight testing.” She pointed to the nearly $8 billion backlog in Aviation and strong order flow. Atherton described the MV-75 as “a great success story” and explained that Bell is “poised to begin testing on the first unit later this year.”
• Atherton discussed progress at Systems, including an IDIQ contract worth up to $200 million for the ATAC business, and highlighted the Ship-to-Shore Connector program, which received over $450 million in awards for the year. She also noted Industrial’s positive organic growth and successful divestiture of the Powersports business.
• CFO David Rosenberg stated, “Revenues in the quarter were $4.2 billion, up 16% or $562 million from last year’s fourth quarter. Segment profit in the quarter was $380 million, up 34% or $97 million from the fourth quarter of 2024.”

Outlook

• Atherton projected 2026 revenues of about $15.5 billion, up about 4.5% from 2025, and adjusted EPS in the range of $6.40 to $6.60. Manufacturing cash flow before pension contributions is expected between $700 million and $800 million, reflecting “approximately $350 million of higher CapEx and long-lead material to support LRIP on the MV-75 program.”
• Rosenberg added, “We’re expecting adjusted earnings per share to be in the range of $6.40 to $6.60. We are also expecting manufacturing cash flow before pension contributions to be about $700 million to $800 million.”
• Segment guidance includes Textron Aviation revenues of about $6.5 billion (approximately 9% growth), Bell revenues of about $4.4 billion (low single-digit growth), Systems revenues of $1.35 billion (about 7% growth), and Industrial segment revenues of about $3.2 billion (low single-digit growth). R&D is expected to be about $480 million, down from $521 million last year.

Financial Results

• Revenues for the quarter were $4.2 billion, segment profit was $380 million, and adjusted income from continuing operations was $1.73 per share. Manufacturing cash flow before pension contributions was $510 million in the quarter.
• Full-year revenues were $14.8 billion, up $1.1 billion from last year; segment profit was $1.4 billion, and adjusted income from continuing operations was $6.10 per share. Manufacturing cash flow before pension contributions totaled $969 million for 2025.
• Aviation segment quarterly revenues were $1.7 billion, with segment profit of $208 million. Bell revenues reached $1.3 billion, with segment profit of $101 million. Systems delivered $323 million in revenue and $43 million in segment profit. Industrial revenues were $821 million, and segment profit was $30 million. eAviation posted $7 million in revenues and a segment loss of $15 million. The Finance segment reported $18 million in revenue and $13 million in profit.
• The company repurchased approximately 2.3 million shares in the quarter, returning $187 million to shareholders, and 10.7 million shares for the full year, totaling $822 million.

Q&A

• Sheila Kahyaoglu, Jefferies LLC: Asked new CEO Lisa Atherton about her top priorities. Atherton responded, “First off, execution… Second will be a portfolio focus… And lastly, we have to really keep building resilience so that all of our businesses perform well across cycles.”
• Kahyaoglu asked about aviation revenue guidance versus order trends. Rosenberg explained, “Our overall guide is $6.5 billion, up from $6 billion last year… I would expect similar aftermarket growth profile of around 6%.”
• Peter Arment, Baird: Queried about MV-75 acceleration. Atherton detailed, “The Army has been crystal clear about their desire to move faster… that acceleration of production… pulls the entire program forward by about 2.5, 3 years.”
• Kristine Liwag, Morgan Stanley: Asked about portfolio growth versus pruning and autonomous systems. Atherton said, “We have to evaluate every single business against that same criteria… I certainly want to accelerate growth and scale in some high-quality aerospace and defense areas.”
• Myles Walton, Wolfe Research: Inquired about supply chain and production rates. Atherton noted, “Engines… has been a laggard for us… we’ve created an in-house training program to upskill the talent.”
• Robert Stallard, Vertical Research: Sought details on MV-75 revenue impact and margins. Rosenberg said, “Ultimately, the opportunity is between 40 and 60 units per year… Bell was a double-digit margin business.”
• Seth Seifman, JPMorgan: Asked about cash deployment and concurrency risk. Atherton cited, “We have high confidence that we have rung out a lot of the concerns that you might have seen in older generation type development programs.”
• Additional questions explored aviation margin recasts, Bell EBIT, defense budget leverage, large cabin jet opportunities, industrial margins, MV-75 logistics, and potential for reviving the Scorpion platform.

Sentiment Analysis

• Analysts pressed for details on execution priorities, MV-75 acceleration, aviation margins, and supply chain recovery, reflecting a slightly positive but probing tone, with general congratulatory remarks on leadership transition.
• Management maintained a confident tone during prepared remarks and Q&A, frequently emphasizing operational discipline and program acceleration. Atherton stated, “We have high confidence that we have rung out a lot of the concerns…”
• Compared to the previous quarter, analyst tone was more focused on program execution and growth prospects, while management shifted from transition planning to detailed operational outlook and strategic priorities.

Quarter-over-Quarter Comparison

• Guidance for 2026 is higher, with $15.5 billion in projected revenues (up 4.5%) and adjusted EPS of $6.40 to $6.60, compared to reiterated full-year adjusted EPS guidance of $6.00 to $6.20 in Q3.
• Leadership has transitioned from Scott Donnelly to Lisa Atherton as CEO, with a strong focus on execution and portfolio management.
• The MV-75 program has been further accelerated, with production timelines pulled forward by 2.5 to 3 years, and significant investment highlighted for 2026.
• Analysts in both quarters focused on growth, supply chain, and margin questions, but the current quarter saw more discussion on capital allocation and program risk mitigation.
• Management’s tone has remained confident, with increased emphasis on resilience, operational rigor, and capital discipline.

Risks and Concerns

• Supply chain constraints, especially engine availability, remain a headwind for Aviation.
• Workforce attrition and efficiency on the factory floor are ongoing challenges; management has implemented an in-house training program to address this.
• The accelerated MV-75 program introduces risk of cost overruns, with CFO Rosenberg noting a potential $60 million to $110 million cumulative catch-up program adjustment, though not currently reflected in guidance.
• Some margin compression at Bell is expected during the ramp of MV-75, but management expects a return to double-digit margins as production scales.

Final Takeaway

Textron concluded 2025 with record revenue and strong segment performance across Aviation, Bell, and Systems. The company projects further top-line and earnings growth for 2026, underpinned by accelerated defense programs, continued aftermarket momentum, and a disciplined approach to capital allocation. Management emphasized operational execution, resilience, and strategic investment, while highlighting ongoing efforts to address supply chain and workforce challenges. The transition to new CEO Lisa Atherton signals continuity and renewed focus on delivering on commitments and driving long-term shareholder value.

Read the full Earnings Call Transcript

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The industrial conglomerate said it expects 2026 adjusted earnings of $6.40 to $6.60 a share, below the consensus estimate of $6.84. Textron (TXT) forecast 2026 revenue of about $15.5 billion, up from $14.8 billion in 2025.

For the fourth quarter, Textron (TXT) reported adjusted earnings of $1.73 a share, topping the Wall Street consensus of $1.70. Revenue rose 16% to $4.2 billion, beating estimates of $4.06 billion.

Net income rose to $235 million, or $1.33 a share, from $141 million, or $0.76 a share.

“2025 was a significant year of accomplishments as Textron (TXT) delivered strong revenue and profit growth,” Chief Executive Lisa Atherton said in the earnings announcement.

Segment pressure tempers outlook

Several negative items in the release weighed on investor sentiment. At Bell, segment profit fell $9 million to $101 million despite an 11% revenue increase, as lower commercial revenues partially offset gains tied to the U.S. Army’s MV-75 program. Textron (TXT) said it plans increased investment at Bell in 2026 to support acceleration of the MV-75 program, which will pressure cash flow.

Industrial results also softened. Industrial revenue fell $48 million to $821 million, and segment profit declined $18 million to $30 million due to higher selling and administrative costs and weaker volume and mix. Textron eAviation revenue slipped to $7 million from $11 million, and the segment posted a $15 million loss.

Textron (TXT) projected manufacturing cash flow before pension contributions of $700 million to $800 million for 2026, down from $969 million in 2025, reflecting the stepped-up MV-75 investment.

Aviation strength and capital returns

The quarter’s bright spot was Textron Aviation, where revenue jumped 36% to $1.7 billion on higher jet and turboprop deliveries. Segment profit more than doubled to $208 million, and backlog ended the quarter at $7.7 billion.

For the full year, Textron (TXT) posted adjusted earnings of $6.10 a share, up from $5.48 in 2024, and segment profit of $1.4 billion, up 14%. Textron (TXT) returned $187 million to shareholders in the quarter through share repurchases, bringing full-year buybacks to $822 million.

Atherton said Textron (TXT) sees strong demand and bookings entering 2026, even as the company absorbs higher program investments and mixed performance across its industrial businesses.

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The firm said it has raised price targets across much of its coverage universe, citing improving production stability at aircraft manufacturers, resilient aftermarket demand and sustained government defense spending. The outlook applies to a broad group of companies including Boeing (BA), GE Aerospace (GE) and Raytheon Technologies (RTX).

In commercial aerospace, the analyst said Boeing (BA) has made meaningful progress in stabilizing production on its 737 and 787 programs. With the Spirit AeroSystems acquisition completed and production recovering, investor focus is expected to shift toward 777X certification and the pace of free cash flow improvement over the next several years.

Susquehanna added that stronger conditions at original equipment manufacturers are benefiting the broader supply chain. The firm expects improving revenue visibility and margin expansion to support earnings and free cash flow growth in 2026 and 2027, particularly for suppliers and engine makers.

On the defense side, the research note points to multiple tailwinds. These include several years of book-to-bill ratios above one, a U.S. administration supportive of higher defense budgets and commitments by NATO allies to increase military spending. Recent legislation also reinforces the outlook for sustained growth, the analyst said.

“We believe we are in the midst of a highly favorable aerospace and defense spending upcycle,” wrote analyst Charles P. Minervino, citing improving visibility and rising free cash flow across much of the sector.

While valuations across the sector have expanded, Susquehanna cautioned that near-term earnings results may face heightened scrutiny. Still, the firm said the medium-term setup remains attractive, supported by strong demand trends and improving operational execution.

Positive-rated on (ATI), (BA), (GD), (GE), (HWM), (LHX), (LMT), (NOC), (RTX), (SARO) and (TXT).

Neutral-rated on (SPCE) and (TDG).

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The S&P 500 Index (SP500) was little changed by midmorning in New York after recently setting a record. The Nasdaq 100 Index (QQQ) fell about 0.6%, led by weakness in technology stocks.

Defense contractors rallied after Trump floated plans to lift U.S. military spending to $1.5 trillion in 2027.

Shares of Lockheed Martin (LMT), Northrop Grumman (NOC), L3Harris Technologies (LHX), General Dynamics (GD), Teledyne (TDY), Textron (TXT) and Kratos Defense & Security Solutions (KTOS) posted sharp gains.

The moves marked a reversal from a day earlier. On Wednesday, Trump signed an executive order targeting major U.S. defense contractors. The order calls for limits on stock buybacks, dividend payments and executive pay until companies increase factory and research investment.

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The order would impose limits on executive compensation, stock buybacks, and dividend payouts for companies tied to delayed or over-budget military projects.

This move underscores a growing frustration within the Pentagon regarding the “entrenched” nature of the defense industry. The administration has signaled a desire to pivot toward a more agile production model for military hardware.

Market reaction and industry effect

The news has already sent ripples through the financial markets. As markets opened Wednesday:

• Northrop Grumman (NOC): Shares dropped 2%.
• Lockheed Martin (LMT): Shares declined 1.6%.

The proposed restrictions target standard financial practices in the sector. For instance, Lockheed Martin (LMT) recently increased its dividend for the 23rd consecutive year and expanded its share repurchase authorization to over $9 billion.

Targets of criticism: Over-budget programs

The administration’s scrutiny follows years of fiscal overruns in flagship programs:

• The F-35 Fighter Jet (Lockheed Martin): Long criticized as one of the most expensive and delayed programs in U.S. history.
• The Sentinel ICBM Program (Northrop Grumman): This $140 billion project is projected to be years behind schedule and roughly 81% over its original budget.

Broader overhaul of Pentagon buying

The potential executive order aligns with a larger restructuring led by Defense Secretary Pete Hegseth. In November, Hegseth introduced reforms designed to:

• Streamline Bureaucracy: Granting direct authority over major weapons programs to bypass fragmented accountability.
• Accelerate Acquisition: Shifting from “unacceptably slow” procurement cycles to rapid technology deployment.
• Align Incentives: Moving away from a system where contractors are rewarded despite delays.

Industry’s counter-argument

While the White House focuses on corporate payouts, defense industry groups argue that government red tape is the primary bottleneck. The Aerospace Industries Association, representing giants like Boeing (BA), RTX (RTX) and General Dynamics (GD), has called for the elimination of over 50 regulatory hurdles, including:

• Stringent cost-accounting standards.
• Complex intellectual property rules.
• Oversight regarding cybersecurity compliance.

The White House has categorized current discussions as speculative until an official announcement is made. However, industry lobbyists remain on high alert as the Treasury Department continues to refine the proposal.

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The proposal aims to fix the military’s slow and costly procurement process, long criticized for producing weapons that are over budget and outdated before delivery. The plan would also create a new Economic Defense Unit tasked with designing modern contracting tools, including purchase commitments and investment programs.

Defense Secretary Pete Hegseth is expected to outline the overhaul, renaming the current Defense Acquisition System as the War-fighting Acquisition System, in an upcoming speech titled “The Arsenal of Freedom.” Each service branch would have 60 days to propose implementation plans and six months to issue new contracting rules encouraging faster delivery.

Analysts warned that the aggressive timelines may be difficult to meet, Bloomberg News reported. The proposal also faces criticism for suggesting looser testing and compliance rules, which some lawmakers say could weaken oversight. Still, it represents one of the Pentagon’s most sweeping efforts in decades to accelerate weapons development and open contracts to a wider range of companies.

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