Citi recommends investing in this aircraft manufacturer with more than 30% growth potential

The S&P 500 index has been rising strongly this year, perhaps somewhat surprisingly, making it increasingly difficult for many investors to pick stocks that they believe are close to a fair price. So Citibank analysts have come to the rescue, recommending stocks of relatively little-known companies to buy, reports CNBC North.

According to Citibank, aircraft maker Textron $TXT should see a rebound from its below-average performance so far in 2023. The bank initiated coverage on the stock with a "buy" recommendation, and its $90 price target suggests the stock could rise a solid 30%+ over the next 12 months.

"Citi is optimistic about revenue and earnings predictability given recent order growth, particularly in the Aviation and Bell segments," analyst Jason Gursky wrote in a note Wednesday.

Gursky said Textron's rating already includes the "recessionary environment" and reduced demand for corporate jets. The analyst added that post-pandemic growth in private travel and limited industry supply should allow Textron and its competitors to "effectively manage supply and demand dynamics."

Current wait times for new aircraft have stretched to more than two years, which has led to Textron's orders growing 360% since 2019.

Gursky also said Textron's industrial segment doesn't have many common intersections across its various assets, which include defense, automotive, aerospace and leisure. That might seem like a disadvantage, but the Citibank analyst immediately reassures investors, "Based on management's actions, it doesn't appear to be denying any assets capital and the ability to invest in new products - that allows each of the segments mentioned to grow," Gursky said.

Growth in military spending worldwide should also create favorable conditions for Textron's defense-oriented Bell and Systems segment, the analyst added.

Shares have fallen less than 4% since the beginning of the year, meaning the company has significantly underperformed the 15.8% increase in the S&P 500 index over the same period. And, of course, that means many investors eager for undervalued stocks could see this as an interesting investment opportunity.

About Textron

Textron Inc. is an American industrial corporation that manufactures aircraft, defense and security products, industrial products and services. The company is divided into five major segments; Textron Aviation, Bell, Textron Systems, Industrial and Finance.

Financial Performance

According to its latest financial results for 2022, Textron achieved total revenues of $14.2 billion, an increase of 7.2% from the previous year. This increase was supported by strong performance in the Textron Aviation and Bell segments, which account for the majority of the company's revenue.

In 2022, net income was $746 million, an increase of 33% from 2021. This increase in earnings is a result of higher sales and savings from operational efficiencies.

Company segments

Textron Aviation is a leading manufacturer of commercial and military aircraft. In 2022, this segment achieved sales of $5.6 billion, an increase of 9% from 2021. This growth was driven by strong demand for business aircraft and successful new product introductions.

Bell is one of the leading manufacturers of helicopters and tiltrotor aircraft. In 2022, this segment achieved sales of $3.2 billion, an increase of 5% from 2021. This growth was supported by strong demand for military helicopters and successful new product introductions.

Textron Systems is a solutions provider to the defense and security industry. In 2022, this segment achieved revenues of $1.2 billion, a decrease of 2% from 2021. This decrease was driven by a reduction in military contracts.

Industrial is a segment that is involved in manufacturing industrial products such as tools, pumps, and golf carts. In 2022, this segment achieved sales of $3.6 billion, an increase of 8% from 2021. This growth was driven by strong demand for industrial products and successful new product launches.

Finance is a segment that provides financing for the purchase of Textron products. In 2022, this segment achieved sales of $600 million, an increase of 6% from 2021. This increase was supported by strong demand for financing.

Conclusion

Like Citi analysts, Textron expects its financial performance to improve in 2023 due to strong demand for its products and services. The company also plans to continue investing in research and development to maintain its competitiveness and support revenue growth.

Textron shares represent an attractive investment for investors seeking exposure to the industrial sector. The company has a strong financial performance, a diversified portfolio of products and services and positive future prospects.