Textron Inc (TXT.N) reported a weaker-than-expected 6.3 percent rise in third-quarter profit, citing weak demand for corporate jets and declines in sales to the military, and the diversified U.S. manufacturer's shares fell more than 5 percent.
The world's largest maker of business aircraft faced "very quiet" ordering activity at its Cessna jet unit in July and August and was unable to make money in the quarter on a new contract to provide drones to the U.S. military, Chief Executive Officer Scott Donnelly told investors on a conference call on Wednesday.
"Order activity was very, very light in July and August," Donnelly said. "We did see it coming back in September."
Orders will need to hold near September's rate for the rest of the year for Cessna to meet Textron's full-year sales expectations, he added.
Textron raised its full-year earnings-per-share target on Wednesday, but the revised range of $1.95 to $2.05 was below the analysts' average estimate of $2.10, according to Thomson Reuters I/B/E/S. The company's previous forecast ranged from $1.80 to $2.00.
Shares of Textron fell 5.3 percent to $25.05 in trading before the market opened.
'CESSNA NEEDS ORDERS'
Under Donnelly, the Providence, Rhode Island-based company has been working to boost profit margins by improving manufacturing efficiencies and trimming back its finance arm.
But margins were down at the Cessna, Bell helicopter, and military equipment units in the quarter.
The declines suggested Textron would not be able to continue to count on productivity improvements for profit growth, said analyst Jeff Sprague of Vertical Research Partners.
"The ability to drive results solely on operational execution without some revenue help has largely run its course," Sprague said. "The bottom line is that Cessna needs orders."
Margins remained flat at the industrial components arm and rose at the finance unit.
Textron said third-quarter net income came to $151 million, or 51 cents per share, compared with $142 million, or 47 cents per share, a year earlier.
Factoring out income from discontinued operations, the profit was 48 cents per share, below analysts' estimates of 51 cents.
Textron, which also makes EZ-Go golf carts, said revenue had risen 6.6 percent to $3.0 billion from $2.8 billion.
Its results kick off a wave of earnings reports from big manufacturers, with General Electric Co (GE.N), Honeywell International Inc (HON.N) and Caterpillar Inc (CAT.N) all due in the coming days.
At Tuesday's close, Textron shares were up about 42 percent over the past year, more than double the 18 percent gain of the broad Standard & Poor's 500 index .SPX.
Textron's rivals include General Dynamics Corp's (GD.N) Gulfstream unit, Canada's Bombardier Inc (BBDb.TO) and Brazil's Embraer SA (EMBR3.SA) in corporate jets, and United Technologies Corp's (UTX.N) Sikorsky unit in helicopters. (Editing by Lisa Von Ahn and Jeffrey Benkoe)