Cessna jet maker Textron Inc. reported weak first-quarter results and cut its profit forecast for the year on a decline in sales to the military and weak demand for its business jets.
Shares of the world's largest maker of business aircraft, fell 11 percent to $26.09 in early Wednesday trade. The stock was one of the top percentage losers on the New York Stock Exchange.
The company, which was hurt in late 2012 by worries that the "fiscal cliff" would trigger large spending cuts, had expected sales of its corporate aircraft to pick up in 2013.
However, based on current business-jet market conditions, the company said it expects deliveries to be down this year.
"Customers, especially in the light jet segment, tend to be small-business owners who continue to defer purchase decisions reflecting continued concerns about the financial outlook," Chief Executive Scott Donnelly said on a post-earnings conference call.
The company's Cessna business jet unit delivered 32 new aircraft in the first quarter ended March, down from 38 units a year earlier.
"Last quarter saw a tantalizing pick up in the Cessna lead indicators, and they may have continued in the first quarter - but that has clearly yet to translate into actual new orders," RBC Capital Markets analyst Robert Stallard wrote in a note titled "Oh Cessna (again)."
Textron, which also makes Bell helicopters and EZ-Go golf carts, said in a statement that it was taking steps to cut costs at Cessna.
It added on its conference call on Wednesday that it would incur costs of about $25 million in the current quarter related to a reduction in its salaried workforce.
"We welcome the news of extra cost-cutting measures in (the Cessna) division, and believe the second half should see improved performance due to this, and the new model launches," Credit Suisse analyst Julian Mitchell said.
The Providence, Rhode Island-based company, which has been trying to improve manufacturing efficiencies and cut back its finance business to boost margins, had earlier said that it would introduce new models of business aircraft later this year.
Textron said it expected 2013 income from continuing operations of $1.90 to $2.10 per share, below its earlier forecast of $2.10 to $2.30 per share.
Sales of Bell helicopters fell 4.5 percent to $949 million, primarily due to lower sales to the military and weak commercial aftermarket sales.
"Given the defense headwinds for Bell ... on the horizon, Textron could really do with a recovery at Cessna if it is to maintain a decent earnings-per-share growth trajectory," RBC's Stallard said.
Net income from continuing operations fell to $115 million, or 40 cents per share, from $120 million, or 41 cents per share, a year earlier. Revenue was flat at $2.86 billion.
Analysts on average expected earnings of 45 cents per share, excluding items, on revenue of $2.89 billion, according to Thomson Reuters I/B/E/S.
Textron's rivals in corporate jets include General Dynamics Corp.'s Gulfstream unit, Canada's Bombardier Inc. and Brazil's Embraer SA. The company competes with United Technologies Corp.'s Sikorsky unit in helicopters.
Textron's results kick off a wave of earnings reports from big manufacturers, with General Electric Co., Honeywell International and Caterpillar Inc. all due in the coming days.
© 2014 Thomson/Reuters. All rights reserved.