Business jet deliveries swing higher in 2014 at Textron Aviation

Business jet deliveries at Textron Aviation were lower in the fourth quarter but higher for the year.

And Textron Inc. CEO Scott Donnelly said he was optimistic about the Wichita-based operations going forward.

Textron Inc. said Wednesday that Textron Aviation – which owns Cessna and Beechcraft – delivered 55 new business jets in the fourth quarter of 2014, which was 11 percent lower than the 62 it delivered in the same quarter a year ago.

But on a conference call with analysts Wednesday morning, Donnelly said business jet deliveries for the full year totaled 159, a 12 percent increase from 2013.

Deliveries of its Beechcraft King Air turboprops totaled 41 for the fourth quarter and 113 for the year, Donnelly said. Textron acquired Beechcraft in March.

The deliveries contributed to higher revenue and profit at Textron Aviation for the quarter and the year. Textron Aviation’s revenue was $1.5 billion in the fourth quarter of 2014, a $597 million increase from the same quarter a year ago. Its profit for the quarter increased to $130 million, compared with $33 million in the fourth quarter of 2013.

For the full year, Textron Aviation revenue increased $1.7 billion to $4.5 billion. Its profit for 2014 was $234 million, compared with a loss in 2013 of $48 million.

Textron officials attributed the higher revenue to improved performance at Textron Aviation, the full effect of the Beechcraft acquisition, and favorable volume, mix and pricing.

Revenue for parent Textron in the quarter was $4.1 billion, up 16.8 percent from $3.5 billion in the fourth quarter of 2013. Beechcraft contributed $556 million to the increase in revenue, according to the company.

Textron’s fourth-quarter 2014 results included $13 million in restructuring costs related to the Beechcraft acquisition, according to a news release, and the Textron Aviation segment profit reflected an $8 million negative impact from fair value step-up adjustments to Beechcraft inventories sold during the quarter.

In the conference call, Donnelly said he was cautiously optimistic about Textron Aviation’s business in 2015.

“New jet customer interest is noticeably better than a year ago … and used aircraft is moving fairly quickly,” he said.

But Donnelly hesitated to offer any stronger statements about his expectations for business jet demand in 2015, as well as an increase in production rates at Cessna.

“On balance, we believe our best path forward at this point is to remain conservative with respect to increasing production, and to continue on our path of new product development,” he said.

The company is expecting Textron Aviation to earn $5 billion in revenue in 2015 and have a profit margin of between 6.5 and 7.5 percent.

Ray Jaworowski, senior aerospace analyst at Forecast International, said the double-digit increase in business jet deliveries speaks well for Textron Aviation.

“The fact that they came in with a 12 percent increase is significant,” he said. “That’s definitely a good sign.”

Jaworowski said he expects continued improvement in the midsize and light-jet markets, which are the market segments that Textron Aviation serves. He said improvement in the nation’s economy will drive new purchases of jets in those categories. Jaworowski said most of the demand for midsize and light jets comes from U.S. buyers.

Donnelly said the new midsize Citation Latitude business jet is on track for certification for the second quarter of 2015. He expects deliveries to begin in the second half of the year.

“At this point … the program is in great shape,” Donnelly said.

Even with the delivery of Latitudes set to start this year, he thinks the mix of Textron Aviation deliveries between new and mature business jets will be “fairly balanced” in 2015.

He said the company’s newest business jet program, the super midsize Longitude, “is ramping up,” although he declined to give analysts specifics on exactly where the program is.

“I do think … you will see a debut of the Longitude sometime in the not too distant future,” Donnelly said.

Textron Aviation’s backlog was $1.4 billion at the end of the fourth quarter of 2014. That was flat to its backlog at the end of third-quarter 2014.

This story was originally published January 28, 2015 at 7:53 AM with the headline "Business jet deliveries swing higher in 2014 at Textron Aviation."