Cessna maker's profit falls as businesses delay spending
(Reuters) - Cessna maker Textron Inc's (TXT.N) profit fell 31 percent in the third quarter and the company warned on business jet deliveries in 2013 as small business owners delay spending.
Shares of the world's largest maker of business aircraft fell 3 percent in early trading but reversed to trade up 4 percent after the company said the U.S. government shutdown would have no impact as previously feared.
A prolonged shutdown would have put more pressure on already weak sales as the fourth quarter generally accounts for more than a third of industry-wide business jet deliveries.
"Demand continues to be soft in the light-to-mid size business jet segment," Chief Executive Scott Donnelly said on a post-earnings conference call.
"Based on the current state of the business jet market, we are taking a more conservative view of Cessna full-year deliveries."
The company lowered its full-year profit forecast to $1.75-$1.85 per share from $1.90-$2.10.
Textron, which also makes Bell helicopters and EZ-Go golf carts, said softer margins at the Bell business also contributed to the forecast cut.
Sales of business jets were expected to improve in 2013 after being hit last year by fears of a "fiscal cliff". However, mandatory U.S. government spending cuts have made small business owners - Cessna's main customers - cautious about big purchases.
"There's rumored money sitting on the sidelines, waiting for clarity in the economy," said Jens Hennig, vice-president of operations at General Aviation Manufacturers Association (GAMA).
Global shipments of business jets fell 4 percent to 283 aircraft in the first half of 2013, according to GAMA, which represents more than 50 fixed-wing aviation aircraft makers, including Cessna. (r.reuters.com/xys83v)
Deliveries of Cessna's Citation business jets fell 39 percent to 25 aircraft in the quarter. The Cessna unit incurred a loss of $23 million as cost cutting failed to pay off.
"We'll be focusing on how demand is progressing (or not) in Cessna, though given this performance we are not getting our hopes up," RBC Capital Markets analyst Robert Stallard wrote in a note to clients.
Textron said costs at its Bell helicopter business rose, partly due to labor issues. CEO Donnelly said although these issues had been resolved, he did not expect margins at the mostly defense-focused unit to improve in the current quarter.
The company's income from continuing operations fell to $98 million, or 35 cents per share, in the quarter ended September 28, from $142 million, or 48 cents per share, a year earlier.
Total revenue dropped 3.3 percent to $2.9 billion.
Providence, Rhode Island-based Textron's stock was up 1 percent at $27.82 at midday on the New York Stock Exchange. It has gained about 10 percent in the past 12 months but has underperformed the broader S&P 500 .SPX index.
(Editing by Sriraj Kalluvila, Maju Samuel)