Should You Buy Textron Near Its 52-Week-high?

Textron has always been an intriguing beast to me.

After all, in 2006 the aerospace conglomerate acquired the comparatively small software outfit by which I was hired straight out of college, effectively taking us under its massive wings.

Consequently, thanks to an impending financial meltdown and Textron's own overexposure to its struggling financial segment, I learned some fantastic lessons about keeping too much of our own company's stock in my 401(k) plan during that time.

TXT Chart
TXT Chart

TXT data by YCharts

Luckily, my retirement accounts were still relatively young (read "small"), so the lesson couldn't have come at a better time.

The products
Still, that gave me plenty of excuses to dig into my new parent company's operations, helping me learn of its incredible global reach thanks to its ownership of Cessna, Bell Helicopter, and unmanned aircraft specialist AAI. In addition, Textron builds golf carts through its E-Z-GO subsidiary, commercial lawn mowers through Jacobsen, and hand tools through Greenlee. What's more, thanks to its ownership of Kautex, we can add to the list automotive parts like gas tanks, windshield washer systems, camshafts, and catalytic converters.

But what really caught my attention were some of Textron's other military-centric products, including it's armored security vehicles (known for their IED-deflecting "V" shaped hulls), RPG protection systems, a self-righting 47-foot rescue boat, and a giant, widely used hovercraft capable of carrying a 75-ton payload at speeds of over 40 knots -- for all you non-seafolk, that's a ridiculous amount of weight to push at 46 miles per hour!

We also can't forget Textron's "Lightweight Tactical Small Arms" tech, which promises to reduce the weight of traditional carbine rifles and ammo by 50%, thanks largely to the use of high-tech caseless ammunition. If that's still not enough, you might take a peek at its Sensor Fuzed Weapon -- a "smart" cluster bomb capable of selectively destroying dozens of targets via munitions which contain built-in logic to either self-destruct in the air or render themselves inert within minutes of hitting the ground if they don't find a suitable target. The result? A clean battlefield with zero civilian casualties to date, and a few pretty amusing first-hand accounts of the weapon's effectiveness.

The numbers
To be fair, however, the best product portfolio in the world isn't worth much if the company can't turn a profit. Luckily for Textron shareholders, after struggling mightily through the end of 2010, the company has managed to post respectable profits in seven of its eight most recent quarters, with the sole outlier being its fourth quarter of 2011, during which the company metaphorically ripped off its bandages and took $0.55 per share in charges. Fortunately, the bulk of those charges were the result of mark-to-market adjustments related to the winding down of its troublesome finance segment.

Meanwhile, Bell Helicopter continues to fire on all cylinders as the company sold 24 of its H-1 helicopters as well as 39 V-22 tiltrotor aircraft, which were the much-heralded result of a joint venture between Textron and Boeing . In fact, we can be sure the V-22 program remains alive and well when we consider just a few days ago the Department of Defense awarded the Bell-Boeing joint office a shiny new $73 million contract to repair 142 separate components on the versatile machine.

In addition, Bell notably managed to deliver 188 commercial helicopters in 2012 -- up 50% from the 125 units it sold in 2011. What's more, the company has told investors to expect further modest increases in commercial demand for the remainder of this year.

Of course, that's not to say all is perfectly well at Textron; the company's automotive segment is experiencing some weakness due to soft demand in Europe and China, and Cessna had to swallow a $19 million charge in the fourth quarter to correct aircraft performance issues. Even then, however, Cessna should eventually recover as emerging markets continue to develop, leaving it nicely poised to benefit from the resulting increase in business jet sales. Sure enough, according to its most recent guidance, Textron seems to agree as it expects to see 9% revenue growth at Cessna in 2013 (albeit largely toward the end of the year thanks to the timing of new models).

Foolish final thoughts
Given Textron's past transgressions, stability is the name of the game for investors who remain encouraged that the company expects revenue to increase 6%, and earnings per share from continuing operations between $2.10 and $2.30. Thanks to Textron's persistent profitability and some other recent considerable contract wins, its stock touched a new 52-week-high last Thursday and is up nearly 30% over the past three months alone. Even after the run, shares of Textron still trade at a reasonable 15.6 times trailing earnings and less than 12 times forward estimates.

Assuming Textron can keep up its consistent results, then -- especially in today's uncertain economic environment -- I have no reason to believe it's shares won't continue to outperform.

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Fool contributor Steve Symington owns shares of Textron. The Motley Fool owns shares of Textron. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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