April 17 (Bloomberg) -- Textron Inc. tumbled the most in about four years after cutting its 2013 profit forecast as demand for Cessna jets declined.
The maker of aircraft, auto parts and military equipment forecast earnings from continuing operations of $1.90 to $2.10 a share, down from a January prediction of $2.10 to $2.30. Cessna’s first-quarter shipments slid to 32 from 38, and the unit posted an $8 million loss.
“We are adjusting production schedules and implementing other appropriate cost actions” including a voluntary separation plan at Cessna, Chief Executive Officer Scott Donnelly said in a statement. “While we are taking these immediate actions, we believe the global business jet market still has significant long-term growth potential.”
Textron, which gets about a quarter of total sales from Cessna aircraft, “remains committed” to introducing the M2, Sovereign and Citation models later this year, as well as the Latitude in 2015 and the Longitude in 2017, Donnelly said.
Business-jet deliveries will be “a couple hundred million dollars” lower than in 2012, Donnelly said on a conference call.
Textron fell 13 percent to $25.41 in New York, the most since April 20, 2009. The company was the biggest decliner today in the Standard & Poor’s 500 Index.
“Investing in Textron on the basis of a belated pickup in business was always a bit of a leap of faith, and this weak quarter for business jets is likely to again test investors’ confidence,” Robert Stallard, a New York-based analyst with RBC Capital Markets, said in a note. “Textron could really do with a recovery at Cessna.”
Companywide, quarterly net income rose less than 1 percent to $119 million, or 41 cents a share, from $118 million, or 40 cents, a year earlier. Excluding discontinued operations, profit was 40 cents, trailing the 45-cent average of 12 analysts’ estimates compiled by Bloomberg.
Revenue was little changed at $2.86 billion, trailing estimates of $2.89 billion.
At the Bell helicopter division, Textron’s largest by sales for the past three years, commercial shipments rose to 40, 10 more than a year earlier, and Donnelly said he expects that trend to continue throughout this year.
The drop in Cessna deliveries will be led by a decline in light jets, including the Mustang, eased somewhat by growth in larger aircraft. Sales will be “particularly low” in the second quarter, the CEO said.
Cessna, which halved its workforce during the recession that began in 2008, is now seeking further reductions through a “voluntary separation plan,” Donnelly said. The planemaker is in its fifth year without growth, he said.
“The light market just hasn’t recovered at this point, contrary to our expectations, and so we’re going to scale back some of the production and reduce the number of aircraft that are out there in that space,” Donnelly said. “The demand just isn’t there.”
The long-term trajectory on business jet volumes, whose recovery is a key to buying Textron shares, remains cloudy, wrote Carter Copeland, an analyst with Barclays Plc in New York who rates the stock overweight.
This year “appears set to be another transition year at Cessna, and we find it tough to find a silver lining in company commentary around what they are seeing in the market,” Copeland wrote.
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