Textron (TXT)

Aerospace and defense company Textron (NYSE:TXT) announced better-than-expected revenue in Q4 CY2025, with sales up 15.6% year on year to $4.18 billion. The company expects the full year’s revenue to be around $15.5 billion, close to analysts’ estimates. Its non-GAAP profit of $1.73 per share was 1.5% above analysts’ consensus estimates.

Company Overview

Listed on the NYSE in 1947, Textron (NYSE:TXT) provides products and services in the aerospace, defense, industrial, and finance sectors.

Aerospace companies often possess technical expertise and have made significant capital investments to produce complex products. It is an industry where innovation is important, and lately, emissions and automation are in focus, so companies that boast advances in these areas can take market share. On the other hand, demand for aerospace products can ebb and flow with economic cycles and geopolitical tensions, which can be particularly painful for companies with high fixed costs.

Textron’s peers and competitors include Boeing (NYSE:BA), Raytheon (NYSE:RTX), and General Dynamics (NYSE:GD)

A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Regrettably, Textron’s sales grew at a tepid 4.9% compounded annual growth rate over the last five years. This was below our standard for the industrials sector and is a rough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Textron’s annualized revenue growth of 4% over the last two years aligns with its five-year trend, suggesting its demand was consistently weak.

This quarter, Textron reported year-on-year revenue growth of 15.6%, and its $4.18 billion of revenue exceeded Wall Street’s estimates by 2.3%.

Looking ahead, sell-side analysts expect revenue to grow 4.3% over the next 12 months, similar to its two-year rate. This projection is underwhelming and suggests its newer products and services will not catalyze better top-line performance yet.

Textron’s operating margin might fluctuated slightly over the last 12 months but has generally stayed the same, averaging 8.5% over the last five years. This profitability was higher than the broader industrials sector, showing it did a decent job managing its expenses.

Analyzing the trend in its profitability, Textron’s operating margin might fluctuated slightly but has generally stayed the same over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

In Q4, Textron generated an operating margin profit margin of 9.1%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Textron’s EPS grew at an astounding 24.2% compounded annual growth rate over the last five years, higher than its 4.9% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

We can take a deeper look into Textron’s earnings quality to better understand the drivers of its performance. A five-year view shows that Textron has repurchased its stock, shrinking its share count by 22.8%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Textron, its two-year annual EPS growth of 4.5% was lower than its five-year trend. We hope its growth can accelerate in the future.

In Q4, Textron reported adjusted EPS of $1.73, up from $1.34 in the same quarter last year. This print beat analysts’ estimates by 1.5%. Over the next 12 months, Wall Street expects Textron’s full-year EPS of $6.11 to grow 12.8%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Textron has shown decent cash profitability, giving it some flexibility to reinvest or return capital to investors. The company’s free cash flow margin averaged 7.2% over the last five years, slightly better than the broader industrials sector.

Taking a step back, we can see that Textron’s margin dropped by 3.4 percentage points during that time. If its declines continue, it could signal increasing investment needs and capital intensity.

Textron’s free cash flow clocked in at $527 million in Q4, equivalent to a 12.6% margin. This result was good as its margin was 4.4 percentage points higher than in the same quarter last year, but we wouldn’t put too much weight on the short term because investment needs can be seasonal, causing temporary swings. Long-term trends are more important.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Although Textron hasn’t been the highest-quality company lately, it historically found a few growth initiatives that worked. Its five-year average ROIC was 12%, higher than most industrials businesses.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Uneventfully, Textron’s ROIC has stayed the same over the last few years. Given the company’s underwhelming financial performance in other areas, we’d like to see its returns improve before recommending the stock.

Textron reported $1.94 billion of cash and $3.54 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $1.83 billion of EBITDA over the last 12 months, we view Textron’s 0.9× net-debt-to-EBITDA ratio as safe. We also see its $108 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We enjoyed seeing Textron beat analysts’ revenue expectations this quarter. On the other hand, its full-year EPS guidance missed and its EBITDA fell slightly short of Wall Street’s estimates. Overall, this quarter could have been better. The stock traded down 4% to $90.50 immediately after reporting.

Updated: January 28, 2026 at 6:48 AM EST

Are you wondering whether to buy Textron or pass? We urge investors to not only consider the latest earnings results but also longer-term business quality and valuation as well.

Textron isn’t a terrible business, but it doesn’t pass our bar. For starters, its revenue growth was uninspiring over the last five years, and analysts don’t see anything changing over the next 12 months. And while its astounding EPS growth over the last five years shows its profits are trickling down to shareholders, the downside is its organic revenue growth has disappointed. On top of that, its cash profitability fell over the last five years.

Textron’s P/E ratio based on the next 12 months is 13.7x. This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We're pretty confident there are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $98.41 on the company (compared to the current share price of $90.50).