Textron stock falls after analyst downgrade

April 14, 2009|By Bloomberg News

Textron Inc., the parent of Hunt Valley-based defense contractor AAI Corp., fell Monday after a Macquarie Capital analyst reduced his rating on the stock to "neutral," saying that last week's surge after a Kuwaiti newspaper report about a possible takeover will make the company "a volatile ride."

Providence, R.I.-based Textron is now more likely to be treated as a takeover candidate and less likely as a "beaten-up finance story," Rob Stallard wrote Monday in an investor note.

"Either way, we believe this still makes for a volatile ride that many may choose to avoid," wrote Stallard, who lowered his rating to "neutral" from "outperform."

Textron fell $1.29, or 9.5 percent, to $12.27 on the New York Stock Exchange on Monday. The stock has declined 79 percent in the past 12 months.

Kuwait's Al-Watan newspaper reported last week that a United Arab Emirates group was preparing to buy Textron, maker of Cessna aircraft and Bell helicopters, for $21 a share. The paper did not identify its sources, and Textron subsequently declined to comment, citing company policy against discussing "rumor and speculation." The report sent Textron stock up 49 percent, the most in at least 28 years, on April 9.

Textron is getting out of financing bus- inesses other than those directly related to its manufacturing units to try to stem losses. The company has reduced its dividend to conserve cash.

The interest from a Middle East group appears to make more sense than earlier speculation that focused on large defense contractors as potential acquirers, Stallard wrote. Reports that the overseas group would be looking to sell the defense operations is also "sensible," the analyst wrote.

"Although we think that Textron could be acquired at a price that is above the current level, nothing is certain, and we think some investors will see this as a good opportunity to take profit," Stallard wrote.

Textron bought AAI in 2007 for $1.1 billion. The company, which builds unmanned spy planes, employs about 1,100 people in Hunt Valley, according to the Baltimore County Department of Economic Development's Web site.

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