Corporate Jet Maker’s Sales Lose Altitude, Stock Follows
January 29, 2009 by Tisa Silver
Filed under Finance
Shares of Textron (Ticker: TXT), the world’s largest manufacturer of corporate jets, fell 31.6 percent on news of a fourth quarter loss and a lowered outlook for 2009.
Textron posted a $209 million loss for the fourth quarter of 2008. This is a steep drop from the $256 million profit posted in the fourth quarter of 2007.
Last year was a bad year for the market, but it was a terrible year for TXT. The stock lost over 79 percent of its value. Here are three possible reasons for the bad year and the bad day: bad economy, bad press and bad bank.
Bad economy – The economic downturn has sent orders down and cancellations up. According to MarketWatch, Textron’s fourth quarter Cessna profits were 31 percent lower than Q4 2007 levels.
Bad press – When the Big 3 Auto CEOs went to DC for the first round of bailout pleas, they were chastised for traveling via private jets. Their fancy planes were all over the news and the gents were sent back to Motor City without a penny. When they returned to Washington, the private jets were abandoned and replaced with hybrid vehicles. They took my advice!
Bad bank – Textron has other businesses including defense and finance arms. The defense side had a good quarter driven by a 74 percent increase in helicopter profits. Unfortunately, the finance business negated those gains by falling $171 million (1.8 times the defense business’ profits).
Now is just not a good time to be in the business of manufacturing corporate jets!
Today’s sharp stock decline makes it seem as if people were surprised by the news. Perhaps the fear of finance arms (i.e. what GE Capital is doing to GE’s stock) is making things worse. The news was grim, but I was a little shocked to see TXT punished so severely. Perhaps friendlier skies will emerge tomorrow.
Shares of TXT closed at $9.09 and gained 5 cents in after hours trading.
(Image source: Picapp)
