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SIVY ON STOCKS from money.com 
November 17, 2000

Whirlybird

With the outlook so uncertain, it's time to hunt for value. And Textron, a 
conglomerate that makes Cessna airplanes and Bell helicopters, fills the bill.

By Michael Sivy

The outcome of the election is still uncertain. So are the Fed's intentions 
for interest rates. And the economy is the most uncertain of all. In such an 
investing climate, it makes a lot of sense to add a little ballast to your 
portfolio, in the form of value stocks. One of the most attractive picks 
today is the industrial conglomerate ( [ 
http://quote.money.com/money/quote/qc?symbols=TXT ] )Textron. 

Conglomerates are often penalized because analysts like companies they can 
fit into specific industry groups. And Textron is tough to pigeonhole. The 
company gets 40 percent of its operating earnings from industrial businesses; 
30 percent from aircraft manufacturing, including Cessna airplanes and Bell 
helicopters; 19 percent from automotive, and 11 percent from financial 
services. 
?
It's a broad mix, but all together, the pieces are producing solid results. 
The aircraft division is flying highest, with revenue up 22 percent and 
profits up 40 percent in the third quarter. The outlook is quite bright, with 
order backlogs rising modestly for both Cessna airplanes and Bell 
helicopters, and profit margins improving slightly. Prospects are also 
attractive for the smallest division, financial services. 
?
The other two divisions have been performing much less impressively because 
of the developing economic slowdown. Automotive showed only a 1 percent 
revenue gain in the third quarter. And though the industrial division managed 
15 percent revenue growth in the quarter, income actually decreased 2 
percent. In addition to the weak economy, a spate of recent acquisitions has 
temporarily depressed that division's profitability. 
?
Textron expects the economy to remain sluggish going into 2001. So to bolster 
its results -- particularly for the industrial division -- Textron is 
developing an extensive cost-cutting and restructuring plan to be implemented 
over the next five quarters. Moreover, Textron has been steadily repurchasing 
stock and intends to continue doing so. Because the price is so low -- the 
stock is down 30 percent year-to-date -- those buybacks can contribute 
significantly to growth in earnings per share. 
?
For the third quarter, total earnings per share rose 14 percent. And with its 
restructuring plans, Textron aims to maintain that rate over the next five 
years. Currently the stock yields 2.4 percent, so Textron shareholders have a 
good shot at a total return averaging as much as 16 percent annually. 

Given those return prospects -- which beat both the market's long-term 
average and the current outlook for the S&P 500 -- Textron looks like a 
compelling choice for conservative investors. With a lot of exposure to 
manufacturing, this conglomerate won't be immune to a prolonged economic 
slowdown. But forecasts assume at least some sluggish economic patches and 
the valuation is tough to beat. At $53.25 a share, the stock trades at 11.4 
times this year's estimated earnings and only about 10 times next year's 
projected results. There are electric utilities offering only half the growth 
that trade for more.



###
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