TXT 94.02 (+3.22%)
US8832031012Aerospace & DefenseAerospace & Defense

Last update on 2024-06-07

Textron (TXT) - Piotroski F-Score Analysis for Year 2023 (Final Score: 8/9)

Textron (TXT) scores 8/9 on the Piotroski F-Score for 2023. Discover insights on Textron's financial health, profitability, and operational efficiency.

Knowledge hint:
The Piotroski F-Score is a number between 0 to 9 which reflects the strength of a company's financial position. It is based on 9 criteria involving profitability, liquidity, and leverage. This model helps investors identify stocks that are strong, undervalued investments.
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Short Analysis - Piotroski Score: 8

We're running Textron (TXT) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Criteria
Company has a positive net income?
1
Company has a positive cash flow?
1
Return on Assets (ROA) are growing?
1
Operating Cashflow are higher than Netincome?
1
Leverage is declining?
1
Current Ratio is growing?
0
Number of shares not diluted?
1
Cross Margin is growing?
1
Asset Turnover Ratio is growing?
1

Textron (TXT) has a strong Piotroski F-Score of 8 out of 9, indicating a solid financial position. The analysis covers profitability, liquidity, and operating efficiency over several years. Textron has demonstrated positive net income, positive cash flow from operations, increasing return on assets, and improvements in leverage and share repurchases. However, a declining current ratio and underperformance in industry benchmarks for Return on Assets signal potential areas of concern.

Insights for Value Investors Seeking Stable Income

Based on the Piotroski F-Score of 8, Textron (TXT) shows a strong financial position and is potentially a good investment. Despite some minor concerns like a declining current ratio and lower than industry median Return on Assets, the overall financial health is robust with strong profitability, positive cash flows, and strategic debt management. Investors looking for a resilient stock with consistent performance may find Textron appealing.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of Textron (TXT)

Company has a positive net income?

Evaluating the net income criterion helps in understanding a company's profitability. A positive net income signifies that the company is making money.

Historical Net Income of Textron (TXT)

As of 2023, Textron (TXT) recorded a net income of $921,000,000. This is indicative of a profitable year for the company, thus earning it a Piotroski score of 1 for this specific criterion. Over the past 20 years, Textron has generally demonstrated a positive net income, except for a few downturns, such as in 2009 and a weaker performance in 2016. The trend of increasing profitability, with a notable peak in 2018 at $1,222,000,000 and consistently positive net income since then, underscores the company’s financial health and resilience. Overall, the steady uptrend from 2021 through 2023 seems favorable.

Company has a positive cash flow?

Positive CFO indicates that a company is generating enough cash from its operations to sustain and grow its business without relying on external funding.

Historical Operating Cash Flow of Textron (TXT)

In 2023, Textron (TXT) reported a Cash Flow from Operations (CFO) of $1,266 million, marking a positive figure. Evaluating the cash flow trend over the last 20 years, it's noticeable that the company has consistently generated positive cash flow from its operations. Only twice did the CFO dip below $800 million, with the lowest being $750 million in 2008 during the global financial crisis. The highest CFO within the period was recorded in 2021 at nearly $1.6 billion. Consistently positive CFO indicates strong operational efficiency, enhancing Textron's ability to fund its operations and expansions internally. Thus, the criterion is met positively.

Return on Assets (ROA) are growing?

ROA, or Return on Assets, measures how efficient a company is at using its assets to generate earnings. It's important because it shows the profitability relative to the company’s total assets. A rising ROA indicates improving efficiency in asset utilization.

Historical change in Return on Assets (ROA) of Textron (TXT)

Textron's ROA increased from 0.0536 in 2022 to 0.0556 in 2023, adding 1 point for this criterion. This trend suggests a minor but positive improvement in asset utilization. Compared to the industry's median ROA of approximately 0.2484, Textron is underperforming, but the increase is still a good sign for the company's internal efficiency. Historically, Textron's ROA has been lower than the industry median, indicating ongoing challenges in achieving asset efficiency at par with its peers.

Operating Cashflow are higher than Netincome?

The operating cash flow criterion compares a company's operating cash flow to its net income. A higher operating cash flow suggests a high-quality income, indicating robust earnings that are well supported by cash inflows rather than accounting adjustments. This criterion serves as a litmus test for whether earnings are potentially inflated and provides insight into the company's liquidity and cash management.

Historical accruals of Textron (TXT)

For Textron (TXT) in 2023, the operating cash flow stood at $1,266 million, higher than the net income of $921 million. This trend is favorable as it implies the company's earnings are backed by strong cash inflows. Looking at the historical data, operating cash flow has consistently surpassed net income, echoing a trend seen over the last 20 years. For instance, in 2022, the operating cash flow was $1,488 million against a net income of $861 million, reinforcing the quality of earnings. The accrual ratios, such as 0.0751 in 2023 compared to 0.0913 in 2022, further support that Textron's accruals are not excessively high, underpinning the liquidity depicted in the reported figures. Therefore, for this criterion, Textron gets a point signifying strong operating cash support for its earnings.

Liquidity of Textron (TXT)

Leverage is declining?

This metric assesses the variability in the company's financial leverage year-over-year.

Historical leverage of Textron (TXT)

In 2022, Textron's leverage stood at 0.2179, but it has slightly decreased to 0.2086 in 2023. Analyzing this shift using the Piotroski F-Score model, we credit companies whose leverage decreases with 1 point, as lower financial leverage typically implies lower financial risk and improved solvency. In this case, although the decrease is modest, it reflects positively on Textron, indicating the company is strategically managing its debts. Given the 20-year leverage data shows fluctuations, the consistent decrease from 2021 to 2023 underscores Textron's resilience against its historical leverage patterns. Thus, this criterion earns Textron 1 point.

Current Ratio is growing?

The Current Ratio measures a company's ability to pay short-term obligations with short-term assets, reflecting liquidity and financial health.

Historical Current Ratio of Textron (TXT)

Textron's current ratio decreased from 2.1896 in 2022 to 1.9198 in 2023. Therefore, the current ratio did not increase, resulting in a score of 0 for this criterion. A closer inspection shows a declining trend over the last 20 years starting from 3.9738 in 2003 to its current level. While it suggests Textron has sufficient liquidity, being slightly above the historical industry median of 2.1805 in 2023, a decreasing trend is generally concerning.

Number of shares not diluted?

Change in shares outstanding indicates the company's stock repurchase activity, affecting earnings per share (EPS) and stockholders' control.

Historical outstanding shares of Textron (TXT)

The outstanding shares for Textron (TXT) decreased from 212,809,000 in 2022 to 201,531,729 in 2023. This decline indicates that the company has repurchased shares, thus reducing the number of shares available to the public, which often positively impacts the earnings per share (EPS) and signals financial health. Over the last 20 years, it's notable that Textron’s outstanding shares peaked in 2009 at 307,255,000 but have generally trended downward since then. This reduction amounts to 93,197,000 shares less compared to the peak, highlighting a long-term commitment to buybacks. This is generally considered good for investors as it could lead to higher stock prices and signifies that the management believes the stock is undervalued.

Operating of Textron (TXT)

Cross Margin is growing?

Gross Margin measures the company's profitability relative to its production costs. It's crucial for identifying efficiency.

Historical gross margin of Textron (TXT)

Textron's Gross Margin increased from 0.1608 in 2022 to 0.1665 in 2023, warranting an additional point under Piotroski’s analysis. This trend is positive, highlighting improved efficiency and profitability. Despite recent years showing fluctuation in Textron's Gross Margin with a low of 0.1336 in 2020, the 2023 figure surpasses the industry median of 0.2484, underscoring a significant competitive edge.

Asset Turnover Ratio is growing?

Asset turnover measures a company's efficiency in using its assets to generate sales. A higher ratio is generally positive.

Historical asset turnover ratio of Textron (TXT)

Textron's Asset Turnover ratio increased from 0.8013 in 2022 to 0.8255 in 2023, indicating improved efficiency in using its assets to generate sales. Historically, this ratio peaked at 1.0075 in 2014 and had a notable low of 0.539 in 2009. The increase in 2023 adds 1 point to the Piotroski Score. This trend is favorable, signaling better asset utilization and operational efficiency.


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