7 Most Undervalued Defense Stocks To Buy According To Analysts

04. Textron Inc. (NYSE:TXT)

Upside Potential: 25.57%

Forward Price to Earnings (P/E) Ratio: 12.35

Number of Hedge Fund Holders: 26

Textron Inc. (NYSE:TXT), a diversified global company headquartered in Providence, Rhode Island, operates across various sectors, including aircraft, defense, industrial, and finance. With six primary segments, Textron Aviation, Bell, Textron Systems, Industrial, Textron eAviation, and Finance, Textron Inc. (NYSE:TXT) offers a broad range of products and services, from business jets and military helicopters to unmanned systems and advanced marine crafts. Given its robust defense capabilities and consistent growth trajectory along with a forward P/E ratio of 12.35, Textron Inc. (NYSE:TXT) should be featured prominently on the list of undervalued defense stocks.

In the second quarter of 2024, Textron Inc. (NYSE:TXT) exceeded earnings expectations with an EPS of $1.54, compared to analysts’ forecasts of $1.49, reflecting strong operational performance. The company reported total revenues of $3.5 billion, an increase from $3.4 billion in the same quarter last year. Manufacturing cash flow before pension contributions reached $320 million, up significantly from $242 million in Q2 2023, indicating improved operational efficiency and cash generation.

Textron Aviation remains a critical growth driver, achieving revenues of $1.5 billion and segment profits of $195 million—up $24 million year-over-year. The backlog in this segment reached an impressive $7.5 billion, reflecting robust demand for Textron Inc. (NYSE:TXT) products, including commercial turboprops and military trainer aircraft. Furthermore, the recent delivery of the King Air 260 under the U.S. Navy’s multi-engine training systems contract exemplifies Textron’s ability to secure lucrative defense contracts.

The Bell segment also showed promising results, with revenues of $794 million and a profit of $82 million, primarily driven by increased military volumes related to the FLRAA program. The positive momentum in military contracts, coupled with Bell’s leadership in tiltrotor technology, positions Textron for sustained growth in defense markets.

Textron Systems, while facing some challenges, remains vital with revenues of $323 million and a backlog of $1.7 billion. The ongoing collaboration with Kodiak Robotics for the U.S. Army’s robotic combat vehicle competition underscores Textron’s commitment to innovation and its strategic alignment with military needs.

Overall, Textron Inc. (NYSE:TXT) strong financial metrics, growing backlog, and strategic initiatives in defense and aviation make it a compelling investment opportunity in the defense sector. As the company continues to leverage its diversified portfolio and capitalize on growing defense spending, Textron Inc. (NYSE:TXT) stands out as a valuable addition to the list of undervalued defense stocks to buy now.