On Wednesday night's Mad Money, Jim Cramer paid a compliment to the much maligned CEO of Textron (
TXT) by pulling his picture off of the Wall of Shame. Cramer has been outspoken in his criticisms of Lewis Campbell over the past few months as Textron fell deeply out of favor with the market. Cramer mentioned the fact that no other CEO spent more money on business travel than did Campbell. However, it appears that the travel has paid off as Textron returned to profitability ahead of schedule with its most recent quarterly report.
The large conglomerate was in some very shaky businesses including private jets, helicopters, auto parts, defense, and even a troubled financing unit. Each of these industries has seen their fair share of difficulty through the recession, but under the leadership of Campbell the tide seems to be turning. That he was able to turn around a company so heavily influenced by corporate jet sales in this environment is an outstanding achievement. Campbell has wisely chosen to wind down the company's finance division, and its Bell Helicopter unit was much stronger than expected with profits rising 25% thanks to lower costs.
In June, when Cramer added Campbell to the Wall of Shame it was not complicated to see why. The stock was down about 80% from June of 2008, and the company looked to be scrapping by on fumes and lowering guidance. They chopped their dividend down 91%, issued debt, and brought a secondary offering to the market. All of these actions appeared hostile towards existing shareholders, but now with the benefit of hindsight they have left Textron much stronger. Investors that got in on the secondary are glad that they did with the stock up nearly 70% since then.
There will still be challenges ahead for Textron, but Campbell has led the company ably through a very difficult period. He is leaving the firm in December, and his recent performance in reviving a company from a very tight spot will allow him to leave with his head held high. At Ockham, we are no longer compelled to recommend this stock based on its valuation because of the recent price appreciation. We currently have TXT rated Fairly Valued.
"Still, for a company that looked like it was struggling to survive, Textron looks like it's ready to thrive. Textron delivered a strong outlook for the fourth quarter. Earnings per share at the high end of the range between 33 and 63 cents. It's very bullish. Far from being cash strapped as it looked when I put it on the wall that has Textron was when it sold 27 million shares at the end of April, they ended with $2.6 billion in cash." — CNBC's Mad Money 10/28/2009
