TEXTRON INC earnings calls

Aviation demand and MV-75 funding outlook

Q (Robert Stallard · Vertical): Are you seeing any change in customer buying because of higher interest rates or geopolitics? For the MV-75 now funded, what is the financial profile going forward?

A: They have not seen changes in customer buying and reported their highest booking of orders in almost three years. The ATR approved funding covered the Q3 investments. They are in a continuing resolution now and expect a steady state in Q4 while waiting for FY 2027 appropriations, which Lisa said includes about $2.3 billion for 2027.

"In fact, as we noted in the remarks, we have actually seen our highest booking of orders in almost three years." — Lisa Atherton (CEO)

Cash flow drivers and spin progress

Q (Myles Walton · Wolfe): What drove the higher free cash flow outlook? And did you reverse any prior reserves or EAC on the MV-75? Also, any update on the industrial sale/spin?

A: They did not reverse any prior MV-75 charges. The biggest driver of the higher cash flow outlook was about $100 million of lower expected CapEx this year, plus strong order activity and deposits at Aviation, which led to the $100 million increase to an $800 million-$900 million outlook. On the industrial sale/spin, progress is going well and they remain on the timeline discussed in April and will announce as they make progress.

"The biggest driver in the increase was the lower expected CapEx spend this year by about $100 million." — David Rosenberg (CFO)

Supply chain fixes and Q4 margins

Q (Gavin Parsons · UBS): Can you give more detail on external supply status and when vertical integration and multi-sourcing (like spars) will improve deliveries? Also, what will drive the Q4 margin step-up?

A: They qualified a second supplier for spars and expect those parts to start coming into play in the coming quarter and to transition into progress in FY 2027. Parts availability is back to about the 2021 timeframe, but not 2019 levels, and the main remaining hold-ups are engines, extrusions, spars, and APUs. For Q4 margins, Turboprop volume and mix are the key drivers, with jet deliveries remaining relatively similar.

"We are starting to see those come into play in the coming quarter, and then we expect that to really transition into progress going into FY 2027." — Lisa Atherton (CEO)

MV-75 accounting and LRIP charge

Q (Gautam Khanna · TD Cowen): Did you reverse the negative EAC taken earlier for the MV-75? Has the expected LRIP 1 negative charge changed from $60 million-$110 million?

A: They did not reverse any of the charges taken on Q2 earnings related to the MV-75. With the program start in a CR, the LRIP award timing may push, and the negative range would likely increase to about $110 million-$150 million if the award pushes into next year. The ATR approval converts to contract mods over time, and they will review prior charges as those mods occur.

"We did not reverse any of the charges that we took on our Q2 earnings related to the MV-75." — David Rosenberg (CFO)

Factory investments and Systems growth drivers

Q (Sheila Kahyaoglu · Jefferies): How are you restoring factory inefficiencies and what investments are planned for 2027? Also, what drove the 16% Systems growth and will it continue?

A: They are investing on the factory floor, adding capital tooling next year to improve production tooling and work instructions, and focusing on turboprops and new block points leading into Gen3s in 2027. Systems growth was driven by Ship-to-Shore Connector productivity improvements and land programs (Ukraine MSFVs, XM30 and ARV prototypes), plus strong service performance and unmanned vehicle awards. They expect these trends to support continued growth.

"What we have seen is requests for capital that you will see us start to invest in over the next year that will improve the production tooling that we have out on the factory floor." — Lisa Atherton (CEO)

Intro / no substantive question

Q (Jamie · JPMorgan): No substantive question was posed. The caller identified themselves as Jamie on for Seth.

A: There was only a brief greeting and no follow-up question during this turn.

ATR funding timing and aftermarket demand

Q (Speaker 9): You approved $350 million ATR but only $300 million was obligated in Q3. Will the other $50 million be obligated in Q4? Also, is the strong Aviation aftermarket growth driven by specific customer types?

A: The $350 million was an estimate; the government put $300 million on contract mod to cover actuals and will obligate additional funds as supplier invoices come in this month and next month. The government has discretion to use additional funds up to the full ATR to cover 2026 spend. Aftermarket growth is broad-based across fleet operators and retail, driven by higher utilization and more customers returning to Textron's service and support.

"As supplier invoices continue to trickle in, through this month and next month, we will continue to obligate against that." — Lisa Atherton (CEO)

Aviation margins next year and Systems one-time

Q (Noah Poponak · Goldman Sachs): Will Aviation have its normal incremental margin next year given ongoing investments and volatility? Was the Systems margin boosted by any one-time items?

A: They expect a 12-month journey of improvement through next year and are not yet giving 2027 guidance. Systems had a one-time benefit totaling about $9 million when comparing Q3 2025 and Q3 2026, which modestly improved the Q3 2026 margin but Systems remains comfortably within its guided margin range.

"But this is going to be, I think, a 12-month journey of improvement as we go forward into Q4 and then into the first half of next year." — David Rosenberg (CFO)

Q4 cash assumptions and separation timing

Q (Peter Arment · Baird): What collections are assumed for Q4 given MV-75 timing? Any update on industrial separation milestones or timelines?

A: Their collection assumptions are embedded in the guidance, and although Q3 had cash challenges due to the late ATR approval, they managed through actions taken in Q2 of 2025 and expect a very strong Q4 cash number. On the industrial separation, they won't provide details now but remain on the April timeline of a 12-month to 18-month separation or spin.

"Our collection assumptions are embedded in our guidance." — David Rosenberg (CFO)

Gen3 entry and Navy trainer competition

Q (Ben Tomik · Wells Fargo): Any update on Gen3 certification and entry into service timing? Any upcoming defense competitions and risks to flag?

A: Gen3 has progressed through flight tests and is in F&R, and they expect some entry into service in the first half of 2027. Textron Aviation Defense is competing for the Navy jet trainer program, which they expect to be awarded mid-next year; they feel strong about their position but acknowledge there is always competition risk.

"I do believe in the first half of 2027, we should start to see some of those entry into service." — Lisa Atherton (CEO)

Delivery targets and M&A appetite

Q (John Godyn · Citi): With strong demand and improving supply chain, what is possible for delivery growth next year? Also, what's your current M&A strategy and appetite for bolt-ons vs transformational deals?

A: It's too early to give detailed guidance, but Lisa's charter is to move toward around the 200 delivery range across turboprops, jets, and helicopters, and they are investing in strategies, capital, and workforce to support that goal. On M&A, they are monitoring assets and want acquisitions that make sense, have a strong balance sheet, will lean into A&D, and remain open to transformational deals if the right asset appears.

"I would say that my charter and ask across the business is that we continue to try to move ourselves to around the 200 delivery range for all of our turboprops, jets, and our helicopters." — Lisa Atherton (CEO)

2026 CapEx cut and 2027 plans

Q (Kyle Benvenuto · Morgan Stanley): Is the $100 million lower CapEx in 2026 deferred into 2027 or a permanent reduction? How should we think about 2027 CapEx and timing of productivity improvements?

A: They expect steady state CapEx in both 2026 and 2027, and the $100 million lowering in 2026 does not change their view for 2027. They still plan to invest in CapEx at Textron Aviation to drive productivity projects that will support higher deliveries and better cash flow, so the overall CapEx framework is unchanged.

"The $100 million lowering for 2026 I don't think changes our view for 2027." — David Rosenberg (CFO)

Exciting priorities and cultural response

Q (Ronald Epstein · BofA): After several months in the role, what areas excite you most and what are the biggest challenges? How is the company culture reacting to these changes?

A: She is most excited about reshaping the portfolio toward A&D, creating synergies, and collaboration across the company's deep engineering expertise, and she sees Project Agincourt as a good fit. Challenges include supplier issues and workforce retention, though retention is improving toward pre-COVID levels. Culturally, the industrial side accepted the separation and has managed well, and the rest of the company is energized and responding positively.

"I think I understand where we need to go in terms of creating synergies across the business." — Lisa Atherton (CEO)

Orders, production, and MV-75 battlefield fit

Q (Doug Harned · Bernstein): Are you seeing any shift in order mix across Aviation products? If you raise production rates, could you grow orders more? Also, how do you see MV-75 fitting into the 2030 battlefield with new competitors?

A: They see no shift in mix; current orders are a pretty standard mix. If they can deliver faster and shorten lead times, they expect the order book to grow further, so production rate and material availability are key. On MV-75, they believe Team Cheyenne and Bell's long investment and the platform's modular open systems architecture will make it a key part of the future fight; they are focused on delivering what the warfighter needs on the required timeline rather than worrying about competitors.

"If they can say, I can get it inside a certain timeframe instead of having to put a deposit down and wait for years, certainly I think you're going to open up the order book even more." — Lisa Atherton (CEO)