Vertical Research Partners Upgrades Textron (TXT) to Buy

Vertical Research Partners analyst Robert Stallard upgraded Textron (NYSE: TXT) from Hold to Buy with a price target of $91.00.

The analyst comments "Sometimes valuation is important – We are upgrading Textron from Hold to Buy with an unchanged $91 Target Price. The stock had a tough 2024, and closed the year down 5% (-28% vs the S&P500). While the company is facing challenges in its Industrials division, this makes up only 14% 2025E profits and it historically not been a major motivator for investors to buy or sell the stock. The valuation is now at a point where we think Textron looks attractive. Too cheap to ignore – On pretty much every metric that we look at, Textron looks good value versus both its valuation history and versus its peers. The stock is trading at 10.7x 2026 P/E, which compares to the aerospace sector average of 26.7x and the defense average of 15.6x. It is now the cheapest stock in our coverage universe, and is currently trading at a 30% valuation discount to its 10 year average forward P/E. The balance sheet is in good shape (2024 Debt to EBITDA of 2.3x), while it has a strong backlog in both Aviation and Bell (~80% of EBIT). Possibility of further portfolio action – Textron announced towards the end of last year that it was looking at strategic alternatives for parts of its Specialty Vehicle business, following a challenging demand environment. While we don’t expect a potential sale to have a material financial impact, we see this as a step in the right direction towards a more focused portfolio. Textron is one of the last publicly quoted multi industry companies, and we think any shift to being a pure play Aerospace & Defense company would have a meaningful positive impact on the valuation. Early days for FLRAA – Textron’s Bell business was announced as the winner of the US Army’s FLRAA competition at the end of 2022. This program makes Bell the primary supplier of tactical helicopters to the Army, with export awards potentially following. The US portion of this program alone is estimated at $70bn, and is likely to last for decades. It is still early days on the program, and Bell’s revenues and profits are set for significant growth as the V-280 enters full rate production. Yet since the FLRAA win, Textron’s shares have only moved up 7% (-37% vs S&P500) suggesting that the potential financial upside from this program has not been fully appreciated."

For an analyst ratings summary and ratings history on Textron click here. For more ratings news on Textron click here.

Shares of Textron closed at $75.73 yesterday.

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