Textron Q2 2025 Earnings Report

Textron EPS Results

• Actual EPS: $1.55
• Consensus EPS: $1.45
• Beat/Miss: Beat by +$0.10
• One Year Ago EPS: $1.54

Textron Revenue Results

• Actual Revenue: $3.72 billion
• Expected Revenue: $3.64 billion
• Beat/Miss: Beat by +$80.71 million
• YoY Revenue Growth: +5.40%

Textron Announcement Details

• Quarter: Q2 2025
• Date: 7/24/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, July 24, 2025
• Conference Call Time: 8:00AM ET

Textron (NYSE:TXT) operates in the aircraft, defense, industrial, and finance businesses worldwide. It operates through six segments: Textron Aviation, Bell, Textron Systems, Industrial, Textron eAviation, and Finance. The Textron Aviation segment manufactures, sells, and services business jets, turboprop and piston engine aircraft, and military trainer and defense aircraft; and offers maintenance, inspection, and repair services, as well as sells commercial parts. The Bell segment supplies military and commercial helicopters, tiltrotor aircrafts, and related spare parts and services. The Textron Systems segment offers unmanned aircraft systems, electronic systems and solutions, advanced marine crafts, piston aircraft engines, live military air-to-air and air-to-ship training, weapons and related components, and armored and specialty vehicles. The Industrial segment offers blow-molded solutions, including conventional plastic fuel tanks and pressurized fuel tanks for hybrid vehicle applications, clear-vision systems, plastic tanks for catalytic reduction systems, and battery housing systems for use in electric vehicles primarily to automobile original equipment manufacturers (OEMs); and golf cars, off-road utility vehicles, powersports products, light transportation vehicles, aviation ground support equipment, professional turf-maintenance equipment, and turf-care vehicles to golf courses and resorts, government agencies and municipalities, consumers, outdoor enthusiasts, and commercial and industrial users. The Textron eAviation segment manufactures and sells light aircraft and gliders with electric and combustion engines; and provides other research and development initiatives related to sustainable aviation solutions. The Finance segment offers financing services to purchase new and pre-owned aviation aircraft and Bell helicopters. Textron Inc. was founded in 1923 and is headquartered in Providence, Rhode Island.

Textron Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Q2 revenues reached $3.7 billion, up 5.4% year-over-year, with segment profit of $346 million and manufacturing cash flow of $336 million.
• Positive Sentiment: Aviation segment revenues rose 2.8% to $1.5 billion, delivering 49 jets and 34 turboprops, while backlog hit $7.85 billion and certifications for the M2 Gen2, CJ3 Gen2 and Ascend are on track.
• Positive Sentiment: Bell segment sales jumped 28% to $1 billion on MV-22R program acceleration and higher commercial helicopter deliveries, with a $6.9 billion backlog and U.S. Army pushing for faster fielding.
• Neutral Sentiment: Industrial revenues fell to $839 million due to the powersports business disposition and lower volume, but segment margin expanded thanks to cost reductions and a major BEV composite housing win.
• Positive Sentiment: Textron repurchased $214 million of shares in Q2, raised manufacturing cash flow guidance to $900 million–$1 billion and reaffirmed full-year EPS of $6.00–$6.20, reflecting favorable cash flow impact from new tax legislation.

Presentation

[Operator]

Hello, everyone, and welcome to the Textron Second Quarter twenty twenty five Earnings Call. My name is Emily, and I'll be moderating your call today. After the prepared remarks, you will have the opportunity to ask any questions, which you can do so by pressing star followed by the number one on your telephone keypad. I will now hand over to Scott Hegstrom, Vice President of Investor Relations and Treasurer to begin. Please go ahead.

[Scott P. Hegstrom, VP - IR & Treasurer at Textron]

Thanks, Emily, and good morning, everyone. Before we begin, I'd like to mention that we will be discussing future estimates and expectations during our call today. These forward looking statements are subject to various risk factors, which are detailed in our SEC filings and also in today's press release. On the call today, we have Scott Donnelly, TxRon's Chairman and CEO and David Rosenberg, our Chief Financial Officer. Our earnings call presentation can be found in the Investor Relations section of our website.

[Scott P. Hegstrom, VP - IR & Treasurer at Textron]

Revenues in the quarter were $3,700,000,000 up 5.4% or $189,000,000 from last year's second quarter. Segment profit in the quarter was $346,000,000 up $3,000,000 from the second quarter of twenty twenty four. Adjusted income from continuing operations was $1.55 per share compared to $1.54 per share in last year's second quarter. Manufacturing cash flow before pension contributions totaled $336,000,000 in the quarter compared to $320,000,000 in last year's second quarter. With that, I'll turn the call over to Scott.

[Scott C. Donnelly, Chairman, CEO & President at Textron]

Thanks, Scott, and good morning, everyone. Second quarter was a good quarter for Textron with revenue growth in both our commercial aircraft and helicopter businesses as well as in Bell's FLAWR program, is now known as the MV75. Aviation had segment revenues of $1,500,000,000 up 2.8% from the second quarter of twenty twenty four, reflecting higher sales for both aircraft and aftermarket. And the factory operations continue to improve as we ramp production. We delivered 49 jets and 34 commercial turboprops compared to 42 jets and 44 commercial turboprops in last year's second quarter.

[Scott C. Donnelly, Chairman, CEO & President at Textron]

Aviation continued to see solid demand across all products with backlog ending the quarter at $7,850,000,000 In the quarter, announced a purchase agreement with a customer in Mexico for four Citation jets and an option for eight additional jets with deliveries expected to begin in 2026. Also during the quarter, Scott Currier hit a number of important milestones including the first delivery in South America, the first Aeromedical order which is also our first order in Africa and as we marked our fifth anniversary of the first flight. On the new product front, we continue to make progress on certification for the M2 Gen two, CJ3 Gen two and the Ascend with deliveries of these aircraft expected to begin in the second half of this year. At Bell, revenues were up $222,000,000 or 28% compared to last year's second quarter, driven by growth in both the MV75 program and our commercial helicopter business. On the military side, the U.

[Scott C. Donnelly, Chairman, CEO & President at Textron]

S. Army announced its intention to accelerate the MV75 program and also announced that the one hundred and first Airborne will be the first division to operate the MV75. In the quarter, Bell delivered two MV75 virtual prototypes to the Army, which are advanced simulators based on a digital twin of the MV75. These simulators will be used to support the training and development of tactics, techniques and procedures leveraging the tiltrotor's significant performance benefits in advanced fielding aircraft. We continue to have ongoing dialogue with the Army on specifics related to the acceleration of the MV75 program.

[Scott C. Donnelly, Chairman, CEO & President at Textron]

This includes acceleration of the development program, pull forward of initial low rate production and rapid fielding of units to the war fighter. Bell was recently down selected as a sole company for the next phase of DARPA Speed and Runway Independent Technologies X Plane program. During this next phase, Bell will design, construct and perform ground testing of an X Plane demonstrator. On the commercial side of the business, revenues increased $73,000,000 primarily due to the mix of aircraft sold at Bell as Bell delivered 32 helicopters in both the '5 and 'twenty four. During the quarter, Bell received an order for 12 Bell four twelve EPXs from the Tunisian Air Force with deliveries expected to begin in early twenty twenty seven.

[Scott C. Donnelly, Chairman, CEO & President at Textron]

In June, Bell signed a five year contract with United Auto Workers for its operations in Fort Worth, Texas. Moving to systems, revenues in the quarter were slightly lower as compared to last year while segment profit margin was 12.5%, up 170 basis points. Earlier this month, systems received a $354,000,000 contract modification from the U. S. Navy to add three ship to shore connector craft.

[Scott C. Donnelly, Chairman, CEO & President at Textron]

In addition, the ship to shore connector program received $300,000,000 through the recently enacted reconciliation bill. During the quarter, the U. S. Army announced approval of Milestone B for the XM-thirty program and transitioned the program to the engineering and manufacturing development phase. Also in the second quarter, systems sold the first tsunami aircraft to the U.

[Scott C. Donnelly, Chairman, CEO & President at Textron]

S. Navy. The tsunami is an attributable rapidly deployable autonomous unmanned surface vehicle. Moving to industrial, we saw lower revenues in the quarter compared to last year's second quarter reflecting the impact of the disposition of Textron specialized vehicles powersports business and lower volume. At Caltex, we recently received a PENTATONIC award from a leading European automotive OEM for battery electric vehicle composite lower battery housing unit.

[Scott C. Donnelly, Chairman, CEO & President at Textron]

This marks the second OEM platform for PENTATONIC and this win secures a major foothold on what is anticipated to become one of the leading global BEV platforms. Segment profit margin was 6.4%, up 180 basis points. At Aviation, the Nuva V300, a long range large capacity hybrid electric VTOL unmanned aircraft continued its flight test program and made its debut at the Paris Air Show in June. With that, I'll turn the call over to David.

[David Rosenberg, EVP & CFO at Textron]

Thank you, Scott, and good morning, everyone. Let's review how each of the segments contributed starting with Textron Aviation. Revenues at Textron Aviation of $1,500,000,000 were up $42,000,000 from the second quarter of twenty twenty four, reflecting higher aircraft revenues of $35,000,000 and higher aftermarket parts and service revenues of 7,000,000 Segment profit was $180,000,000 in the second quarter, down $15,000,000 from a year ago, primarily due to the mix of aircraft sold and higher warranty costs, partially offset by the favorable impact of manufacturing efficiencies and higher pricing Backlog in the segment ended the quarter at $7,850,000,000 Moving to Bell. Revenues were $1,000,000,000 up $222,000,000 from the second quarter of twenty twenty four. The revenue increase in the quarter was driven by higher military revenues of $149,000,000 primarily due to higher volume from MV75 and higher commercial revenues of $73,000,000 primarily due to the mix of aircraft sold.

[David Rosenberg, EVP & CFO at Textron]

Segment profit of $80,000,000 was down $2,000,000 from last year's second quarter, primarily reflecting higher research and development costs, partially offset by higher volume and mix. Backlog in the segment ended the quarter at 6,900,000,000.0 At Textron Systems, revenues were $321,000,000 down $2,000,000 from last year's second quarter. Segment profit of $40,000,000 was up $5,000,000 compared with the second quarter of twenty twenty four, primarily due to lower selling and administrative expense. Backlog in the segment ended the quarter at 2,200,000,000 Industrial revenues were $839,000,000 down $75,000,000 from last year's second quarter, largely at Textron Specialized Vehicles where revenues decreased 66,000,000 reflecting the impact from the disposition of the powersports business and lower volume primarily in golf products. Segment profit of $54,000,000 was up $12,000,000 from the second quarter of twenty twenty four, primarily reflecting the impact from the disposition of the powersports business and the benefit of cost reductions from restructuring activities, partially offset by lower volume and mix.

[David Rosenberg, EVP & CFO at Textron]

Textron e Aviation segment revenues were $8,000,000 in the 2025 as compared to $9,000,000 in last year's second quarter and segment loss was $16,000,000 as compared with a segment loss of $18,000,000 in the second quarter of twenty twenty four. Finance segment revenues were $15,000,000 and profit was $8,000,000 in the 2025 as compared to segment revenues of $12,000,000 and profit of $7,000,000 in the second quarter of twenty twenty four. Moving below segment profit, corporate expenses were $36,000,000 net interest expense for the Manufacturing Group was 26,000,000 LIFO inventory provision was $38,000,000 and intangible asset amortization was $8,000,000 Net special charges were $4,000,000 and the non service component of pension and post retirement income were $67,000,000 Our adjusted effective tax rate for the 2025 was 20%. During the quarter, we repurchased approximately 2,900,000.0 shares, returning $214,000,000 in cash to shareholders. Year to date, we have repurchased approximately 5,800,000.0 shares returning $429,000,000 to shareholders.

[David Rosenberg, EVP & CFO at Textron]

To wrap up with guidance, we are reiterating our expected full year adjusted earnings per share to be in the range of $6 to $6.2 We are increasing our expected full year manufacturing cash flow before pension contributions to be in the range of $900,000,000 to $1,000,000,000 up from our previous range of 800,000,000 to $900,000,000 This reiterated adjusted EPS outlook and increased cash outlook incorporates the estimated impact associated with recently enacted tax legislation. The One Big Beautiful Bill Act that was signed into law includes several provisions that benefit cash flow and has some elements that impact our adjusted effective tax rate for the year. As a result, we now expect an adjusted effective tax rate in the range of 20% to 21% for the year. Our adjusted EPS outlook of $6 to $6.2 incorporates this higher adjusted effective tax rate. That concludes our prepared remarks. So operator, we can open the line for questions.

[Operator]

Thank you. We will now begin the question and answer session. Our first question today comes from David Strauss with Barclays. Please go ahead.

[David Strauss, MD, Equity Research - Aerospace & Defense at Barclays]

Good morning.

[Scott C. Donnelly, Chairman, CEO & President at Textron]

Good morning.

[David Rosenberg, EVP & CFO at Textron]

Good morning, David.

[David Strauss, MD, Equity Research - Aerospace & Defense at Barclays]

Scott, I wanted to ask you about the potential acceleration on NV75. What that could look like? What that can mean for your numbers? And if you could remind us of the contract structure as you move into LRIP?

[Scott C. Donnelly, Chairman, CEO & President at Textron]

Sure. David, I mean this is very much a work in process. I would say on the development side, we're already have very good visibility around that I suppose in agreement with the Army on how to proceed on accelerating EMD. That's partly why you're seeing the increased EMD revenue here in 2025. And certainly, will see an acceleration of that in 2026 as we try to get that first aircraft completed and turned over and ready for test.

[Scott C. Donnelly, Chairman, CEO & President at Textron]

So I think on the EMD front, it's pretty clear we know what we've got to go do and both we and the Army are working to execute against that. In terms of the production acceleration, the you may recall the LRIP, which was eight aircraft, which was bid in the initial contract, production of that wouldn't have started until really triggering off Milestone C. So that was going to reflect probably about an eighteen month or so gap between the last of the EMD delivered aircraft and LRIP. We're now pulling that forward and the intent is to basically be able to smoothly transition from that last EMD aircraft into the first of the LRIP. So that will probably pull in something on the order of eighteen months.

[Scott C. Donnelly, Chairman, CEO & President at Textron]

And then we're also working talking about what does the ramp look like. So it's not just going to be those eight, but what do you think about in terms of the next lot and the next lot right behind that. And so those discussions are still ongoing with the Army. I think what you're seeing primarily in the FY 2026 budget ask is the increased dollars to support that acceleration of the EMD and you would expect to see increase and additional production dollars in the FY 2027 budget ask to support what I just talked about, an acceleration of that first lot, but also lining up the second and the third lots of production.

[David Strauss, MD, Equity Research - Aerospace & Defense at Barclays]

Okay. Thanks for that. And Dave, could you touch on maybe what some of the offsets were to the higher tax rate to hold the guidance? It seems like Bell's maybe coming in better than you expected.

[David Rosenberg, EVP & CFO at Textron]

So as we sit right now, the biggest offset is the timing of our share repurchase this year has been a little ahead of what we originally planned. So from an average share comp perspective, we should be better than what we started the year at. So that in essence gave us the ability to hold the guide with the while at the same time taking this 200 basis to 300 basis point increase in the effective tax rate.

[David Strauss, MD, Equity Research - Aerospace & Defense at Barclays]

Okay. Thanks very much.

[Operator]

Thank you. Our next question comes from Peter Arment with Baird. Please go ahead, Peter.

[Peter J. Arment, Senior Research Analyst at Baird]

Good morning, Scott and Dave. Nice results. Hey, Scott, could you maybe give us a little your thoughts around just kind of the margins at Aviation? I know that you had kind of talked to us about some of the pricing that was going to be lingering from last year flowing through. How do we think about that as we move forward in the second half?

[Scott C. Donnelly, Chairman, CEO & President at Textron]

Sharpe, look, I think we're right on track with where we expected to be on Aviation as we guided to the beginning of the year with the recovery kind of coming off of the strike and some of those issues as you mentioned pricing of aircraft that moved into this year. We knew we would be a little more margin challenged in the first half than the second half. So I think we're right on track with that. I think the production ramp is going well. King Air is probably the only one where we've been a little behind.

[Scott C. Donnelly, Chairman, CEO & President at Textron]

That's a tougher line to get going and picking back up. The good news is I think that's now running well. We certainly in line with what we expected, we'll see good jet deliveries in the back half of the year, but also much stronger turboprop deliveries in the back half of the year. So and all those dynamics that we were kind of factoring into our plan are playing out exactly as we expected. So we certainly expect to see nice volume increases here through Q3 and Q4 with that margin step ups that will put us right on our target for the full year.

[Peter J. Arment, Senior Research Analyst at Baird]

Appreciate that color, Scott. And just maybe just as a follow-up and staying within Aviation, just talk about I guess the demand environment continue to have very good bookings and just what you're seeing in terms of customer interest in the new models?

[Scott C. Donnelly, Chairman, CEO & President at Textron]

Yes. The demand has been strong. So we're seeing good order flow. I think customers are very excited about the Gen IIs of both the M2 and the CJ3 coming out. Ascend also getting close to certification here and we have a good backlog on that as well.

[Scott C. Donnelly, Chairman, CEO & President at Textron]

So I think the aircraft portfolio is doing really well in the market.

[Peter J. Arment, Senior Research Analyst at Baird]

Appreciate it. I'll jump back in queue. Thanks Scott.

[Operator]

Thank you. Our next question comes from Sheila Kahyaoglu with Jefferies. Please go ahead.

[Sheila Kahyaoglu, Aerospace, Defense & Airlines Equity Research at Jefferies]

Good morning, Scott and David. Maybe let's stick to Aviation. Scott, on that last point, are you seeing any changes given the tariffs on competitors and yourselves? How are you thinking about tariffs? And what were the higher warranty costs you mentioned for the aviation margins?

[Scott C. Donnelly, Chairman, CEO & President at Textron]

So we haven't really seen an impact yet on the tower front. I would say that there are certainly some customers and let's say particularly in some Latin American countries that are concerned, but we'll see how that plays out. I guess our view of these things at the moment is to sort of not panic and give it a little time to let things settle out. So we'll continue to kind of watch it and see. But we haven't certainly have not yet seen any kind of dramatic impact.

[Scott C. Donnelly, Chairman, CEO & President at Textron]

And as you know, Sheila, the bulk of our deliveries are U. S, the bulk of our manufacturing is U. S. So I think in the grand scheme of things, while the tariff stuff can create some concerns and some noise, think we're actually pretty well positioned with our large North American manufacturing base and our largely North American based delivery. So think in that respect, we're in pretty good shape.

[Scott C. Donnelly, Chairman, CEO & President at Textron]

On the warranty, there's always a few things moving around in there. We have had an issue that we've been dealing with probably for a couple of years that we feel like some of the work we're doing in the shops is coming in a little higher than what we originally expected and we thought it was appropriate at this point just to sort of true up the reserves on that to make sure we can cover the balance of work that needs to be done there.

[Sheila Kahyaoglu, Aerospace, Defense & Airlines Equity Research at Jefferies]

Got it. And maybe if I could ask one on Bell margins. They fell below 8% in the quarter. You called out R and D costs. How should we expect that to progress through the remainder of the year?

[Scott C. Donnelly, Chairman, CEO & President at Textron]

Well, look, I mean, do think we saw the as we talked about much higher revenue that we originally had in there on the EMD side of FLAWRA, which is obviously a fantastic program for us, but a little more margin challenged. So I think we'll see the balance of the year up a little bit from where we are certainly this quarter. To be honest, given the fact that we're going to have probably higher than our revenue guide, largely driven by the EMD piece of flora, we'll have higher revenues, but we'll probably be towards the lower end of the bell range driven by that.

[Sheila Kahyaoglu, Aerospace, Defense & Airlines Equity Research at Jefferies]

Thank you.

[Scott C. Donnelly, Chairman, CEO & President at Textron]

Sure.

[Operator]

Thank you. Our next question comes from Seth Seifman with JPMorgan. Please go ahead.

[Seth Seifman, Executive Director at JP Morgan]

Thanks very much and good morning. I wanted to ask about systems. And I think two of the competitions that you've been looking at for decisions this year, programs are either canceled or under review, but there's maybe some other opportunities emerging that you talked about. So how are you thinking about the systems outlook and the opportunities for growth there?

[Scott C. Donnelly, Chairman, CEO & President at Textron]

Yes, Seth, look, I think the obviously, we were surprised by the situation on RCV and FTUAS to see those programs be terminated. In both those cases, don't think it's the end. I mean, certainly, the Army is going to continue to invest in robotics and we will look for ways to participate in those future activities. The same is true on FQAS. While the program the FQAS itself program was terminated, the Army again is putting more money into tactical UAS system.

[Scott C. Donnelly, Chairman, CEO & President at Textron]

So it's going to be acquired a different way, different competition and clearly we will compete for our with our products in those opportunities. So it certainly impacted us in terms of what we would have expected timing of those programs, which we kind of had in the win column. But there's other opportunities that we'll pursue in both those spaces. What is happening in the year is that we're seeing nice growth and a number of big wins in other portions of the systems portfolio that I think will effectively offset the terminations this year of RCV and FTOF. So there's been a number of things, competitions that are already awarded.

[Scott C. Donnelly, Chairman, CEO & President at Textron]

Obviously, short connector program continues to grow. The Sentinel program continues to grow. And I think we'll see some nice wins in other pieces of the portfolio as well as we go through the balance of the year.

[Seth Seifman, Executive Director at JP Morgan]

Okay. Okay. And then this was the think this was probably the highest earnings quarter for Industrial in a little while. Is there do you feel like there's potentially some upside there versus the initial outlook?

[Scott C. Donnelly, Chairman, CEO & President at Textron]

Well, look, it's we'll we're probably not revising our guides at the time. But I think the industrial business, as you know, we've done a fair bit on post powersports taking cost out of the business and restructuring. This is a year where you have the cyclical low on the golf side. That's actually a very predictable cycle and totally consistent with our plan. But I think the team is executing well here post powersports and we'll we're certainly feeling good about being in the range despite taking the revenue loss on the disposition of the business.

[Seth Seifman, Executive Director at JP Morgan]

Okay, great. Thanks very much.

[Scott C. Donnelly, Chairman, CEO & President at Textron]

Sure.

[Operator]

Thank you. Our next question comes from Robert Stallard with Vertical Research. Please go ahead, Robert.

[Robert Stallard, Partner - Global Aerospace & Defense at Vertical Research Partners]

Thanks so much. Good morning.

[Scott C. Donnelly, Chairman, CEO & President at Textron]

Good morning.

[Robert Stallard, Partner - Global Aerospace & Defense at Vertical Research Partners]

Scott, first of all, on flower, which I now should call MV75. With the acceleration plan, would this require Textron to put in more capital to enable this eighteen month acceleration?

[Scott C. Donnelly, Chairman, CEO & President at Textron]

Yes, Robert, would say sure. I mean, we've always had a capital plan that ties in with the production program and ramping that. So certainly, in terms of how we were thinking about the long term, this would accelerate those plans, let's say, on the order of around eighteen months. So we've always anticipated that this was coming, but it's a manageable number and it's something that we factor into our long range plan. And that's that would be a fantastic outcome if we have to spend more capital sooner to ramp this program.

[Robert Stallard, Partner - Global Aerospace & Defense at Vertical Research Partners]

Right. Yes. And secondly, on Aviation, we've seen some of your peers signing up to new big fleet purchases. Is this something you'd be interested in doing more of going forward?

[Scott C. Donnelly, Chairman, CEO & President at Textron]

Look, think we're only interested in fleet business if good business. I mean, our demand continues to be strong. Our retail demand is strong. So we're always happy to look at fleet deals. As you know, we do some fleet deals, but it needs to make economic sense for us participate in those.

[Scott C. Donnelly, Chairman, CEO & President at Textron]

In the meantime, we're very happy with our retail business. The demand is there. The backlog is there. So we always look at every opportunity, whether it's a one off aircraft or a fleet.

[Robert Stallard, Partner - Global Aerospace & Defense at Vertical Research Partners]

Thanks very much.

[Operator]

Thank you. Our next question comes from Myles Walton with Wolfe Research. Please go ahead.

[Myles Walton, Managing Director at Wolfe Research LLC]

Thanks. Good morning. Scott, I was wondering, given your experience in the Group three UAS market, is there any interest given the attention of the administration in the SecDef on the smaller drone market for higher levels of investment at Textron more broadly?

[Scott C. Donnelly, Chairman, CEO & President at Textron]

Well, okay. And the Group three has obviously been our strong suit. So there are opportunities. There's R and D work going on, at some of the smaller classes or, frankly, places where we might participate in some of these programs. But nothing that we would announce or specifically comment on at this time, I guess.

[Myles Walton, Managing Director at Wolfe Research LLC]

Okay. Good enough. And then I guess from a perspective of the 05/25, is there any update you can offer on that certification? It does seem like the FAA maybe is moving along with things and maybe there's more adjudication that's being done.

[Scott C. Donnelly, Chairman, CEO & President at Textron]

Well, look, I mean, it's hard for us to comment. I mean, that's very much an FAA process at this stage of the game. I'd like to think we're in kind of the last stages here and obviously a lot of documentation going back and forth and trying to get through final test criteria. And we're just going to continue to work that with the FAA.

[Myles Walton, Managing Director at Wolfe Research LLC]

All right. Thank you.

[Operator]

Thank you. Our next question comes from Ronald Epstein with Bank of America. Please go ahead.

[Ronald Epstein, MD - Aerospace & Defense at Bank of America Merrill Lynch]

Hi, good morning. This is Samantha Styro on for Ron today. I just wanted to ask about capital deployment. You did about $200,000,000 of share repurchases in the quarter. How are you thinking about that going forward? And then M and A opportunities? Thanks.

[Samantha Stiroh, Global Research Analyst at Bank of America]

Sure. Look, as we've said, I think our primary focus on capital deployment is opportunistic share buyback. Obviously, that's certainly what we did in the first half of the year. And I would expect we will continue that through the second half of the year. From an acquisition standpoint, if something made sense, I think we have plenty of capacity to be able to do something like that.

[Samantha Stiroh, Global Research Analyst at Bank of America]

So in the meantime, the most logical thing for us to do and I think the best return for our shareholders in terms of where we are is to continue to focus capital in redeployment via share buyback. Hello?

[Operator]

Thank you. Our next question comes from Doug Hartnett with Bernstein. Please go ahead.

[Douglas Harned, Managing Director at AB Bernstein]

Good morning. Thank you. Going back to demand, you've talked about it. It looks strong. We've heard some of that from others.

[Douglas Harned, Managing Director at AB Bernstein]

But when you consider your how could you describe your discussions with corporate customers? Because on one hand, they've got uncertainty in this environment, this tariff environment on when to make capital investments. On the other hand, you've got bonus depreciation. How do you see these different factors playing into those decisions at your corporate customers?

[Scott C. Donnelly, Chairman, CEO & President at Textron]

I think net of everything is positive.

[Scott C. Donnelly, Chairman, CEO & President at Textron]

I think the corporate world is healthy right now. Sure everybody obviously depending on companies have a lot of different exposures or not relative to the tariff situation. But the demand, the dialogues are good. Flying is very strong, right, which helps to drive our aftermarket. So it's sure it appears to us that the corporate world is flying and buying and managing their fleets as you expect in pretty good times.

[Douglas Harned, Managing Director at AB Bernstein]

And then separately at Bell, you're you didn't create you had a higher R and D in the quarter. Where where are you directing that? Is that connected at all to m v '25 or is that on the commercial side? What are you looking at in terms of investment there?

[Scott C. Donnelly, Chairman, CEO & President at Textron]

So MV25 is primarily contracted now, right? So that's all under the EMD phase. The R and D spending, obviously it looked lighter, I mean, in the quarter. A year ago, that was largely because of the termination of the power program and sort of close out of that contract and whatnot. But when you look at and think about the balance of our year, we will have higher R and D spending and the R and D spending on the commercial side is largely focused around the 05/25 and completing that program.

[Scott C. Donnelly, Chairman, CEO & President at Textron]

On the military side, it's really focused around the R and D programs that we need to execute to support the development of the high speed VTOL program. So especially now with having been selected for the DARPA SPRINT program. So that's sort of I would expect R and D to be fairly flat on quarter to quarter, certainly up over last year, again largely because of the increased spend on R and D associated with the high speed VTOL program.

[Douglas Harned, Managing Director at AB Bernstein]

Okay. Very good. Thank you.

[Scott C. Donnelly, Chairman, CEO & President at Textron]

Sure.

[Operator]

Thank you. Our next question comes from Noah Poplar with Goldman Sachs. Please go ahead, Noah.

[Noah Poponak, Research Analyst at Goldman Sachs]

Hey, good morning, everyone. On MV75, when you put the pieces together of movement in timing of EMD and LRIP, does total program revenue grow each of the next few years? Or does it decline at any point in the window as you're shifting from development to LRIP and before you make it to full rate production?

[Scott C. Donnelly, Chairman, CEO & President at Textron]

Well, we don't know the exact answer to that yet, Noah. I think we have to continue to work on what the production acceleration looks like. EMD clearly is up here in the next couple of years. The pull forward of LRIP volumes would obviously add to that. So I mean, I guess I feel fairly confident saying it's going to continue to go up the next couple of years, but we've got to get that I mean, from an Army budgeting standpoint, they're this is very much a work in process, right, as they look at their 27, 28 and on program budgets.

[Scott C. Donnelly, Chairman, CEO & President at Textron]

Certainly, what the Secretary and the Chief would like to go do when they talk about the volumes and getting things delivered out to the one hundred and first would drive incremental volume here for the next several years.

[Noah Poponak, Research Analyst at Goldman Sachs]

Okay. And Scott, we the industry has had these other examples of programs that fixed the LRIP pricing at the time of the bid, where, you know, by the time you get to LRIP, there's been cost creep, so your LRIPs are breakeven or loss making. Can you talk about where you see price cost right now on the LRIPs compared to when you bid?

[Scott C. Donnelly, Chairman, CEO & President at Textron]

Well, I'm not sure we go into that level of detail. No, I mean, we expect and like you know the LRIP the eight LRIP aircraft were bid as a fixed price as part of the original contract. And so you wouldn't expect margins to be very good there. I think part of what you see in our margin rates is pretty conservative assumptions on our part, to have the appropriate amount of MR to support those programs. But those haven't been definitized yet.

[Scott C. Donnelly, Chairman, CEO & President at Textron]

Supplier pricing has been locked in. I don't have specific numbers for you, but we would expect those and always have expected those to be pretty challenging for those first eight aircraft.

[Noah Poponak, Research Analyst at Goldman Sachs]

Okay. And then just last one, was hoping to ask you about Scott, just how you're thinking about setting supply and deliveries at Cessna for the rest of this year and into next year. Just we've had this window with the strike and supply chain. It's a little tricky to sort of have a sense for where you think supply should be, I guess, on a run rate basis from here.

[Scott C. Donnelly, Chairman, CEO & President at Textron]

Yes. Well, look, I mean, obviously, as we got all the way back to the beginning of the year, we certainly have a production plan that has a ramp going through the course of the year. That's been well communicated to all of our suppliers, obviously. And as you know, we're probably a lot of our stuff is in that two year for some of that long cycle material. So certainly, those suppliers are understanding with where we are on the ramp this year and even out through 2026 as well.

[Scott C. Donnelly, Chairman, CEO & President at Textron]

So I think supplier communication and recognition of what that supply chain ramp needs to look like is pretty well understood. Not everybody is totally there obviously. The supply chain I would say is in much better condition than it was going back a couple of years ago, but you still have issues that pop up. And as we always say, it's good not to have too many supplier problems, but every supplier part is an important part, right? So it's I think it's not because of a lack of understanding of what the ramp needs to be.

[Scott C. Donnelly, Chairman, CEO & President at Textron]

It's execution and obviously we work through that every day.

[Noah Poponak, Research Analyst at Goldman Sachs]

Should we still be thinking about the 2019 just over 200 units being recovered in the medium term?

[Scott C. Donnelly, Chairman, CEO & President at Textron]

I'm not sure we're prepared to give guidance for 2026 just yet.

[Noah Poponak, Research Analyst at Goldman Sachs]

Okay. Fair enough. Thank you very much.

[Scott C. Donnelly, Chairman, CEO & President at Textron]

Okay.

[Operator]

Thank you. Our next question comes from Gautam Khanna with TD Cowen. Please go ahead.

[Gautam Khanna, Analyst at TD Cowen]

Good morning. Thanks guys.

[Scott C. Donnelly, Chairman, CEO & President at Textron]

Sure. Good morning.

[Gautam Khanna, Analyst at TD Cowen]

I was wondering if you could elaborate a little bit on commercial helicopter demand, how that's trending?

[Scott C. Donnelly, Chairman, CEO & President at Textron]

I'd say it's strong actually across all the models, everything from 412s all the way down to the 505s. I think the commercial helicopter business is in good shape. We had strong delivery on a year over year basis here in Q1, Q3, Q4 was much stronger last year. So I think we'll have more comparable comps on a year over year basis. But certainly for the total year helicopter deliveries are looking good and order activity is very good. So I think that business is in good shape.

[Gautam Khanna, Analyst at TD Cowen]

And just stepping back broadly, would you say that you haven't really seen much demand erosion due to tariffs and all the trade policy uncertainty across the portfolio? Have you seen

[Scott C. Donnelly, Chairman, CEO & President at Textron]

evidence Not at this point.

[Operator]

Of

[Scott C. Donnelly, Chairman, CEO & President at Textron]

No, we have not seen evidence of that yet. I'm not saying it can't happen, but I think most customers are sort of taking sort of a wait and see with some of these things or just assuming that things are going to get resolved. And again, if you look at a lot of our stuff, particularly the fixed wing world, the business jets, we are largely North American anyway. A lot of our international helicopter things end up being either FMS or some foreign military and I think that activity, that order rate seems to be continuing despite a lot of the tariff dialogue.

[Gautam Khanna, Analyst at TD Cowen]

Thank you.

[Noah Poponak, Research Analyst at Goldman Sachs]

Sure.

[Operator]

Thank you. Our next question comes from Christine Lewogue with Morgan Stanley. Please go ahead.

[Kristine Liwag, Executive Director at Morgan Stanley]

Hey, good morning everyone. Scott, maybe on tariffs and aviation, I mean tariffs are increasing the cost for your European and Brazilian competitors. As these things shake out and some of the tariffs stick, ultimately they'll probably see an incremental higher cost for U. S. Customers.

[Kristine Liwag, Executive Director at Morgan Stanley]

So when we think about this shaking out in the next few years, do you see this as an opportunity to gain market share? Or is this an opportunity to get more price and also get more margin?

[Scott C. Donnelly, Chairman, CEO & President at Textron]

Well, look Christine, I think again, I think we got need to give this time and see where all the tariff dialogues settle out. So I'm a little reluctant to think about a year, two years, three years down the road on these things. But I mean, there are certainly cases where we have foreign competition that just has a lower cost basis and tends to be more aggressive on price. And we kind of hold the line in there and have tried to be focused on making sure we're running a profitable business and the business can afford to keep reinvesting in product lines and we'll continue to do that. Does that do long term tariffs start to play a little more of a normalizing in terms of some of the cost and pricing that we see?

[Scott C. Donnelly, Chairman, CEO & President at Textron]

That could be. But it's I'd say it's too early in the process to really know the answer to that question.

[Kristine Liwag, Executive Director at Morgan Stanley]

Thanks. So maybe switching gears to e Aviation, earlier this year you had the Nuva V300 get its first flight. How has been the customer reception of this aircraft? And are you expecting this to enter into service this year? And should it enter into service this year, what kind of customer milestones or production rate are you thinking about for an aircraft like this?

[Scott C. Donnelly, Chairman, CEO & President at Textron]

So the flight test program continues. So there's a lot of work going on. We continue to fly regularly. It's obviously we've done a fair bit of hover flying. We do need to go into conversion mode.

[Scott C. Donnelly, Chairman, CEO & President at Textron]

Look, I think, Christine, in terms of certifications of aircraft of this class, that's just something I don't see in the near term. I do think we see some interest on some military applications. I mean, given the range and the payload capability of this craft compared to others, I think we could have a real advantage there. And so but we're in early dialogues with those prospective customers as they start to see what this aircraft can really do from a performance standpoint. But right now, on a commercial basis, I see no pathway to how you certify these kinds of aircraft.

[Scott C. Donnelly, Chairman, CEO & President at Textron]

So I certainly wouldn't expect something that could happen anywhere near this year or next year.

[Kristine Liwag, Executive Director at Morgan Stanley]

Great. Thanks for the color.

[Scott C. Donnelly, Chairman, CEO & President at Textron]

Sure.

[Operator]

Thank you. Our next question comes from Gavin Parsons with UBS. Please go ahead.

[Gavin Parsons, Director - Aerospace & Defense Equity Research at UBS Group]

Thanks. Good morning.

[David Rosenberg, EVP & CFO at Textron]

Good morning.

[Scott C. Donnelly, Chairman, CEO & President at Textron]

Good morning.

[Gavin Parsons, Director - Aerospace & Defense Equity Research at UBS Group]

I guess it's been kind of four quarters now that aviation margins have been pretty disrupted. Is the second half of this year pretty normal? So as we think about going beyond 25%, is that a good baseline?

[Scott C. Donnelly, Chairman, CEO & President at Textron]

Well, I said, I think our progression of margin through the course of the year is playing out as we expected. And so I think the issues that we had around the impacts of the strike and what that meant to our shift in our production to the right and a lot of the disruption and things of that nature are fairly well behind us. And so I think we're very much on plan to hit the guide numbers that we gave you guys. And so certainly with those disruptions behind us, would expect to see good margins for the business as we go on into 2026. So we're not going guide yet, but obviously, you guys will definitely see the kind of margins that we expected for the full year to come well within that range that we guided.

[Scott C. Donnelly, Chairman, CEO & President at Textron]

So look, think considering all the disruptions and challenges from the strike and the holdover and ongoing supply chain issues to be posting about 12% margins, I think the business is doing pretty well. Certainly, we expect that margin rate to expand over the course of the year.

[Gavin Parsons, Director - Aerospace & Defense Equity Research at UBS Group]

Okay. Thanks. And then once you get through Denali, any categories where you see the opportunity for a new aircraft in aviation?

[Scott C. Donnelly, Chairman, CEO & President at Textron]

Not that we are prepared to announce at this time.

[Gavin Parsons, Director - Aerospace & Defense Equity Research at UBS Group]

Okay. Thank you.

[Operator]

Thank you. Our next question comes from David Strauss with Barclays. Please go ahead.

[David Strauss, MD, Equity Research - Aerospace & Defense at Barclays]

Thanks. Thanks for taking the follow-up. Scott, what's the outlook for King Air? I mean, the volumes have come down a fair amount there. Where could that settle out for the year?

[Scott C. Donnelly, Chairman, CEO & President at Textron]

Sure, David. Look, think the King Air line, as I commented earlier, is one of the more challenging lines. I mean, it's just an older product line in terms of tooling and documentation. I mean, it's always been a great product, but it probably was impacted more than anything else in terms of just the challenges of going through the strike and all the COVID, the turnovers and all that kind of stuff. I think that line has stabilized and is running much better than it was.

[Scott C. Donnelly, Chairman, CEO & President at Textron]

And so, look, I think you'll we'll have strong deliveries in Q3 and Q4 on the King Air line. So as I said, it's probably the last line to recover from a lot of the disruptions. It is now flowing well. And like I said, I think it supports considerably higher deliveries in Q3 and Q4.

[David Strauss, MD, Equity Research - Aerospace & Defense at Barclays]

Okay. And Caltex, was that flat or maybe just down a little bit in the quarter?

[Scott C. Donnelly, Chairman, CEO & President at Textron]

It was down a little bit in the quarter, which again is what we expected. I think the global automotive markets are more or less behaving as had been inspected. And that team continues to do a nice job in terms of managing cost and capital deployment and all that kind of stuff. So I'd say on the positive side there, we've been investing as you guys know for a number of years around pentatonic to make sure that we have a good play in the pure battery electric vehicle market. We do continue to see nice momentum shift in hybrid, which is an important piece of tank business for us and not just the tank piece, but also the opportunity to participate in the battery portion of a hybrid vehicle and the win this past quarter with a major OEM on their DEV platforms, think is encouraging for the future of that business.

[David Strauss, MD, Equity Research - Aerospace & Defense at Barclays]

Okay. And then last one. Dave, the tax rate step up, is that fairly ratable Q3, Q4? Or is there a big catch up in Q3?

[David Rosenberg, EVP & CFO at Textron]

You're right, Dave. It's going to be a big catch up in Q3 reflecting the cumulative impact to date for the year. So the it will be Q3 skewed.

[Scott C. Donnelly, Chairman, CEO & President at Textron]

So I think on the tax thing guys, everybody I mean, know there's a dialogue with a lot of companies, The tax bill is a very good thing, right? I mean, it's going to give us a significant impact on cash for the next several years. The bonus depreciation is clearly positive for our customers who buy our large capital assets. It's also good for us because we do deploy capital. So I think there's this is mostly good.

[Scott C. Donnelly, Chairman, CEO & President at Textron]

We are going to take this near term perturbation of a tax rate increase, which as David said, is probably 200, 300 basis points. That is it is what it is. But I think net of everything, the tax bill is a good thing for our company.

[David Strauss, MD, Equity Research - Aerospace & Defense at Barclays]

Sorry, on the back of that, I got to ask one more. So on Section 174, I thought the benefit might be larger than the $100,000,000 that you took cash flow up by. Is there any offset to that running through the numbers?

[David Rosenberg, EVP & CFO at Textron]

That's where we see it right now. It's a relatively complicated build. So we're continuing to evaluate it and we'll continue to try to drive additional opportunity. But that's how we see the impact at least for this year at this point. But as Scott mentioned, overall, it's a significant positive on cash flow as we go forward.

[Operator]

Thank you. Our next question comes from Pete Skibitski with Alembic Global. Please go ahead.

[Pete Skibitski, Director - Aerospace & Defense Equity Research at Alembic Global Advisors]

Hey, good morning, Good morning, Pete. Scott, just one quick In the second quarter, one of your engine suppliers, Williams International, announced a pretty sizable, I think they're calling it 1,000,000,000 expansion into Florida and in some of their other facilities as well. And obviously, they have other customers, but I was wondering if you could give us any color at all in terms of what that might mean for Citation and just the visibility to continue to grow maybe beyond the near term?

[Scott C. Donnelly, Chairman, CEO & President at Textron]

Well, I mean, obviously, I won't comment on their particular expansion works. But look, Williams is a very important supplier to us. They've been a very good supplier to us. They deliver a great product. It has a history of delivering great performance. And it's a good relationship and one that I expect to see to continue to grow into the future. Williams does a great job of supporting our new product programs and expect they'll continue to do so in the future as well.

[Pete Skibitski, Director - Aerospace & Defense Equity Research at Alembic Global Advisors]

Thank you. Sure.

[Operator]

Thank you. At this time, we have no further questions. And so this concludes our call. Thank you all for your participation. You may now disconnect your lines.

Participants

Executives

• Scott P. Hegstrom, VP - IR & Treasurer
• Scott C. Donnelly, Chairman, CEO & President
• David Rosenberg, EVP & CFO

Analysts

• David Strauss, MD, Equity Research - Aerospace & Defense at Barclays
• Peter J. Arment, Senior Research Analyst at Baird
• Sheila Kahyaoglu, Aerospace, Defense & Airlines Equity Research at Jefferies
• Seth Seifman, Executive Director at JP Morgan
• Robert Stallard, Partner - Global Aerospace & Defense at Vertical Research Partners
• Myles Walton, Managing Director at Wolfe Research LLC
• Ronald Epstein, MD - Aerospace & Defense at Bank of America Merrill Lynch
• Samantha Stiroh, Global Research Analyst at Bank of America
• Douglas Harned, Managing Director at AB Bernstein
• Noah Poponak, Research Analyst at Goldman Sachs
• Gautam Khanna, Analyst at TD Cowen
• Kristine Liwag, Executive Director at Morgan Stanley
• Gavin Parsons, Director - Aerospace & Defense Equity Research at UBS Group
• Pete Skibitski, Director - Aerospace & Defense Equity Research at Alembic Global Advisors