Is Textron Stock a Buy in 2026 After Its 2025 Earnings Beat?
Key Points
Textron beat on sales and earnings last week, but its guidance disappointed investors.
After sales earnings raced ahead 18% in 2025, 2026 growth will slow into the single digits.
A funny thing happened to Textron (NYSE: TXT) stock last week -- and by "funny" I mean seemingly perverse.
Textron reported an earnings beat for its final quarter of 2025, with adjusted profit of $1.73 per share, where Wall Street had expected only $1.70, and sales of $4.2 billion, where analysts had forecast less than $4.1 billion. Despite the strong results, Textron stock tumbled nearly 8% on earnings day and closed the week 7.3% lower than it began.
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Why the counterintuitive drop? The main reason was guidance.
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Textron Q4 earnings
Textron grew its sales 16% year over year in Q4. Adjusted earnings climbed 29%, while earnings as calculated according to generally accepted accounting principles (GAAP) were both better and worse: "worse" because per GAAP, Textron earned only $1.33. But "better" because $1.33 per share was a 75% improvement over last year's Q4 earnings.
For the full year 2025, Textron earned $5.12 per share, GAAP (up 18% year over year), and $6.10 per share, adjusted (up only 11%), on sales of $14.8 billion (up 8%).
The company's Textron Aviation business, which builds both civilian and military Cessna and Beechcraft airplanes, is going like gangbusters, with sales climbing 13% for the year and accelerating to 36% growth in the final quarter. Textron's Bell helicopter division also performed well, posting 20% growth for the year, although growth slowed to 11% in Q4.
Sales performance ranged from anemic to negative at the company's two other big divisions, though: Textron Systems, which builds ground vehicles and UAVs, and also industrial.
Free cash flow for the year soared 46.6% to $944 million.
Is Textron stock a buy?
Which brings us at last to guidance -- which, as I mentioned above, was a bit of a disappointment after what would have otherwise been a fine quarter for Textron.
Wall Street analysts have been forecasting that Textron will earn $6.84 per share on sales of $15.5 billion in 2026. Textron, however, warned that while it will probably hit or even beat the sales target, its adjusted earnings will be no more than $6.60 per share -- with GAAP profit probably just $5.49 per share, plus or minus $0.10.
Mind you, these aren't horrible numbers. Assuming Textron hits its target, the stock will trade at only 16 times current-year earnings. If Textron were still growing earnings at the 18% pace it set in 2025, that would be fine. Going from $5.12 in 2025 to $5.49 in 2026, however, implies a growth rate of only 7% -- probably not fast enough to justify a price-to-earnings ratio of 16.
Granted, most analysts polled by S&P Global Market Intelligence anticipate growth will perk up. Consensus forecasts see the company growing earnings 10%-plus over the next five years. But for a 16 P/E stock that pays a miserly dividend yield of only 0.1%, that's still too high a price to pay.
To me, Textron stock is a hold at best.
Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends Textron. The Motley Fool has a disclosure policy.