Textron Inc (TXT.N), the world's largest maker of business aircraft, reported a 34 percent fall in quarterly profit as deliveries fell by more than half at its Cessna unit.
Cessna, which makes small, piston-powered aircraft and business jets, posted a quarterly loss as deliveries of its flagship Citation jets slumped to 20 from 49 a year earlier.
Sequestration-related budget cuts by the U.S. government have put a lid on spending by many small businesses - Cessna's main customers.
The unit's share of total revenue fell to 20 percent from 26 percent a year earlier.
To cope with declining demand, Textron has been forced to cut costs at Cessna. However, it has also raised prices and introduced new models.
"It's a tough balancing act," Textron Chief Executive Scott Donnelly said on a conference call.
Cessna's two new jets, Citation Sovereign and Citation X, would be ready for delivery late this year and in early 2014, the CEO said.
The Bell helicopter business, which makes military and civilian helicopters and is Textron's largest unit by revenue, delivered 44 commercial helicopters in the second quarter, compared with 47 a year ago. Revenue fell 3 percent.
Donnelly said a number of larger commercial Bell aircraft would be delivered in the second half of the year.
Last month, the unit, in association with Boeing Co (BA.N), won a $4.9 billion defense contract to manufacture 99 V-22 Osprey tiltrotor aircraft.
Textron's second-quarter revenue of $2.8 billion was below analysts' average estimate of $3.01 billion, according to Thomson Reuters I/B/E/S.
A strong performance by Textron's industrials business, which makes fuel systems and golf and turf care products, helped the company beat analysts' earnings expectations.
Earnings of $114 million, or 40 cents per share, from continuing operations came in above the 38 cents per share analysts had estimated.
RBC Capital Markets analyst Robert Stallard attributed the earnings beat to a good performance by the company's industrial unit.
A strong auto market in North America and new products drove growth in the business, the company said.
Revenue from the industrial business rose 6 percent to $801 million, or 29 percent of the total, making it the second-largest unit by revenue.
Stallard said the division could emerge as "a source of upside" for the company's sales.
Shares of Providence, Rhode Island-based Textron, which have shed 6 percent of their value in the last three months, fell a further 2 percent to $26.99 in morning trade on the New York Stock Exchange on Wednesday.
(Reporting by Bijoy Koyitty in Bangalore; Editing by Rodney Joyce, Sreejiraj Eluvangal)