Diversified manufacturer Textron Inc (TXT.N) posted stronger-than-expected results for the first quarter, helped by strong demand for helicopters, and said demand for business jets is recovering.
The company's Bell helicopter arm notched a 59 percent surge in profit on a 33 percent rise in revenue, helping drive the bottom-line beat, and Chief Executive Scott Donnelly said demand for Cessna jets was also accelerating.
The world's largest maker of corporate jets said on Wednesday that earnings came to $118 million, or 40 cents per share, compared with $29 million, or 9 cents per share, a year earlier.
Analysts on average had forecast a profit of 35 cents per share, according to Thomson Reuters I/B/E/S.
Textron shares -- which had run up some 46 percent since the start of the year -- fell 3 percent to $26.82 in early trading on the New York Stock Exchange.
"The last few days and last week, we've seen some pretty stellar earnings reports, and there's been a settling in of a feeling that if you don't beat by a mile you're going to get punished," said Oliver Pursche, president of Gary Goldberg Financial Services, which does not currently own Textron shares but follows the stock.
Over the past week, companies across a range of sectors, including Alcoa Inc (AA.N), Citigroup Inc (C.N) and Johnson & Johnson (JNJ.N) topped Wall Street's profit forecasts. Investors will get more detail on the industrial sector later this week, when Danaher Corp (DHR.N) and General Electric Co (GE.N) are scheduled to report.
CESSNA GAINING ALTITUDE
Textron's Cessna unit is showing signs of recovering from the deep slump in demand for corporate jets, Donnelly said.
"We continue to see improvement in customer activity," Donnelly said. "New orders (in the first quarter) were higher than last year's first, second and third quarters combined."
Cessna notched 20 percent sales growth in the quarter, but remained in the red with a $6 million operating loss.
The company and its rivals, including Brazil's Embraer SA (EMBR3.SA) and the Learjet unit of Canada's Bombardier (BBDb.TO), are gaining from the financial troubles of Hawker Beechcraft, which is owned by a private equity arm of Goldman Sachs Group Inc (GS.N) and Onex Corp (OCX.TO), Donnelly said.
Sources told Reuters last month that Hawker is contemplating a bankruptcy filing and early this month ratings agency Standard & Poor's cut its rating on the company to "D," the lowest possible, after it failed to make an interest payment.
"You're going to see loss of share in the jet business at Hawker Beechcraft, and I think that share is disbursing between Cessna and Embraer and Learjet," Donnelly said.
Providence, Rhode Island-based Textron would consider acquiring parts of Hawker were it to seek bankruptcy protection, Donnelly added.
"There are certainly some assets there that we think would be very interesting," he told analysts.
Cessna began talks last month with China's AVIC SASADY.UL aimed at forming a joint venture to produce business jets in the world's second-largest economy.
HOLDS 2012 OUTLOOK STEADY
The profit beat reflected strong growth at Bell and Textron's industrial arm, which makes products including EZ-Go golf carts and automotive components.
"The upside was driven by Bell and industrial," said Jeff Sprague, analyst at Vertical Research Partners. "The margin performance (at Bell) was solid and better than we expected."
Revenue rose 15.2 percent to $2.86 billion from $2.48 billion, beating analysts' estimates of $2.7 billion.
Textron affirmed its full-year profit forecast of $1.80 to $2.00 per share from continuing operations. The company said it expected revenue for the year to rise 11 percent to about $12.5 billion, driven by strong growth at Cessna and Bell.
(Reporting By Scott Malone in Boston; Editing by Lisa Von Ahn, Maureen Bavdek, Dave Zimmerman)