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Stay on top of the market with Prudential Securities and Dow Jones. Click on the url below to learn how you can receive a 1-year subscription to The Wall Street Journal or BARRON'S, FREE! http://www.money.com/prudentialsecurities ***************************************************************** 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. ### Post your comments on Michael's column at: http://www.money.com/depts/investing/sivy/index.html To subscribe or unsubscribe to Sivy on Stocks, go to: http://www.money.com/email/ Earning Releases and Calls For the latest corporate earnings releases and online conference calls click on: http://money.ccbn.com * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * Special Internet Offer!!! Sign up for a RISK-FREE issue of MONEY MAGAZINE at http://www.money.com/subscribe2 Or if you prefer call our toll-free number 1-800-544-4594 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
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