Cessna jets maker Textron reported a higher-than-expected quarterly profit on Wednesday and said it had agreed to sell its tools and test equipment business to Emerson Electric, driving shares 7 percent higher before the bell.
Textron, which cited improved sales of business jets and turboprop aircraft as one of the drivers of profit, reaffirmed its full-year earnings forecast of $2.95 to $3.15 per share, including the impact of the divestiture.
The company said it would sell its tools and test equipment business, known for brands such as Greenlee, Klauke, and Sherman+Reilly, to Emerson for $810 million within the next 90 days.
The unit, which makes electrical and utility tools, cable connectors, and mechanical and hydraulic tools for construction and telecommunications industries, brought in revenue of about $470 million in 2017.
“We believe the market will be glad to see Textron moving to prune the portfolio. Guidance for sales, earnings per share and cash flow is unchanged but the company seems poised to raise it later during the year,” J.P. Morgan Securities analyst Seth Seifman said.
The Providence, Rhode Island-based company’s income from continuing operations rose to $189 million, or 72 cents per share, in the quarter, from $100 million, or 37 cents per share, a year earlier.
Total revenue rose 6.6 percent to $3.30 billion.
Analysts had expected first-quarter earnings of 48 cents per share, and revenue $3.09 billion, according to Thomson Reuters I/B/E/S.
“Wow. We were not expecting this. Not only was this a much stronger than expected operating quarter from Textron, we’ve also seen some movement on the portfolio which has arguably been long overdue,” Vertical Research Partners analyst Robert Stallard said.
Textron sold 36 new business jets and 29 commercial turboprop aircraft in the quarter ended March 31, compared with 35 jets and 20 commercial turboprops a year earlier.
Revenue at Textron’s Bell helicopter unit rose 7.9 percent to $752 million, helped by higher sales to the military. The company has forecast full-year sales at Bell to be down slightly at $3.2 billion.
Textron said it was able to achieve significant margin improvement with overall margins at 8.5 percent up from 7.1 percent a year earlier.
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