Aerospace and defense company Textron (NYSE: TXT) reported revenue ahead of Wall Streets expectations in Q4 CY2025, with sales up 15.6% year on year to $4.18 billion. The company expects the full year’s revenue to be around $15.5 billion, close to analysts’ estimates. Its non-GAAP profit of $1.73 per share was 1.5% above analysts’ consensus estimates.

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StockStory’s Take

Textron’s fourth quarter results drew a negative market reaction, despite the company topping Wall Street’s revenue and adjusted earnings expectations. Management attributed the quarter’s growth primarily to higher aircraft deliveries following recovery from the prior year’s strike, as well as expanded aftermarket activity and strong demand for Bell’s military helicopters. CEO Lisa Atherton also highlighted the impact of key certifications—such as the Citation Ascend and CJ3 Gen 2—on segment momentum and the company’s growing backlog, while acknowledging ongoing supply chain pressures, particularly around engines and workforce retention.

Looking ahead, Textron’s guidance reflects a cautious outlook shaped by several factors, including rising capital expenditures and supply chain headwinds. Management expects investments to accelerate production of the MV-75 program, driving higher near-term costs but aiming to position the company for faster growth in future years. CFO David Rosenberg cautioned that profitability will be pressured by upfront spending, but emphasized that productivity improvements and continued strength in aftermarket aviation are expected to support margins over time. Atherton added, “We have to do what we say we’re going to do,” underscoring a focus on execution and portfolio discipline as key themes for the year.

Key Insights from Management’s Remarks

Management identified the acceleration of major defense programs, recovery in aviation deliveries, and ongoing portfolio adjustments as central to the quarter’s performance, while operational challenges remained in supply chain and workforce efficiency.

• Aviation deliveries rebounded: Aircraft deliveries increased following strike recovery, with Textron Aviation shipping more jets and turboprops compared to the prior year. This volume, paired with new certifications like the Citation Ascend, supported strong aftermarket activity and segment profit expansion.

• MV-75 program acceleration: The U.S. Army’s push to expedite the MV-75 tiltrotor program led to significant investment in production capability and engineering, pulling forward both revenues and capital expenditures. Management reported that over 90% of engineering drawings are complete and manufacturing for initial units is underway.

• Aftermarket strength: Strong aircraft utilization drove 6% growth in aftermarket revenues for Textron Aviation. Management considers this a key differentiator, providing recurring revenue streams and resilience through market cycles.

• Portfolio streamlining: The divestiture of the powersports business contributed to a more focused industrial segment, while ongoing evaluation of all business units centers on strategic fit and cash generation potential. Atherton pointed to past acquisitions, such as ATAC, as examples of small assets with long-term growth potential.

• Supply chain and workforce headwinds: Despite improvements, certain key components—especially engines—and high attrition in early-tenure workers continued to affect operational efficiency. Management responded with targeted training programs and efforts to vertically integrate critical supply chain elements.

Drivers of Future Performance

Textron’s outlook for the next year hinges on delivering defense program commitments, expanding aviation output, and overcoming cost headwinds from supply chain and capital investment.

• MV-75 program investment: The accelerated timeline for the MV-75 program will drive higher capital expenditures in the near term, as Textron invests in production capacity and long-lead materials. Management expects these investments to support long-term revenue growth but acknowledged the risk of cost overruns and potential contract-related charges as the program moves to its next phase.

• Aviation productivity and margins: Improving factory efficiency and managing supply chain constraints, especially for engine components, are key to meeting higher aviation delivery targets. Management noted that workforce retention and ongoing training will play a critical role in margin improvement, and expects the aviation segment to benefit from solid pricing and a robust aftermarket business.

• Portfolio discipline and resilience: Leadership aims to allocate capital toward high-return aerospace and defense assets, while continuing to prune non-core businesses. Investments in vertical integration and technology are designed to build resilience against industry cycles, but management flagged that execution risks remain, particularly regarding timely completion of program milestones and maintaining cost control.

Catalysts in Upcoming Quarters

In the coming quarters, our analysts will monitor (1) the pace of MV-75 program execution and any updates to contract timing or cost adjustments, (2) the ability of Textron Aviation to convert backlog into higher deliveries amid ongoing supply chain and workforce challenges, and (3) the effectiveness of portfolio optimization efforts, particularly any further asset sales or vertical integration moves. Progress on these fronts will be crucial for tracking Textron’s strategy and financial performance.

Textron currently trades at $86.81, down from $94.23 just before the earnings. Is there an opportunity in the stock?The answer lies in our full research report (it’s free).

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