Textron (TXT) Unveils a Cargo Plane Concept That Needs No Pilot

On September 14, Textron Aviation, a subsidiary of Textron (NYSE:TXT), and Merlin, an autonomous flight software company, unveiled a cargo plane concept called the Cessna SkyCourier UX, which is designed to operate without a pilot. The concept aims to provide supply support for dispersed military forces in risky supply routes. Despite being a concept and not a product yet, the SkyCourier UX could potentially revolutionize military logistics.

Small drones struggle to carry substantial cargo, while larger military aircraft are often excessive for short-range deliveries. The SkyCourier UX would bridge this gap, carrying approximately 6,000 pounds or up to three LD3 cargo containers, and landing on unpaved strips. With no crew onboard, designers could transform cockpit space into additional cargo room, complete with a spacious nose opening for loading.

Merlin's CEO, Matt George, has stated that the software behind the SkyCourier UX has logged hundreds of autonomous flights across various planes, including Beechcraft King Airs and Cessna Caravans. Given that the base aircraft is already certified and in production, Textron can leverage an existing factory and support network rather than starting from scratch.

As of July 28, Textron reported a 3% revenue increase to $3.8 billion, with adjusted earnings of $1.62 per share, surpassing the previous year's $1.55 per share. This growth is beneficial for the company's bottom line. Additionally, Textron Aviation's second-quarter revenue saw a slight increase of 1%, but jet deliveries dropped to 40 from 49. The segment's profit decreased by 3% to $165 million, primarily due to manufacturing inefficiencies and weaker volume and mix.

Despite the positive signs in revenue and adjusted earnings, the stock price shows some bearish sentiment. The forward P/E ratio is at 10.79 as of September 18, indicating that the market expects little growth from Textron. Moreover, the number of hedge funds holding Textron has decreased from 40 to 34, and short interest stands at 5.10% of the float, highlighting a tangible if modest bear camp.

While there is potential for the SkyCourier UX to transform contested military logistics, the stock's performance remains dependent on customer orders and funding for the MV-75 Cheyenne program. Until orders or funding are secured, Textron remains a mixed bag, offering a low-price entry point but also posing risks if aviation profit continues to decline or if the Cheyenne funding does not materialize.