Earnings Call
Textron Inc (TXT)
Earnings Call Transcript - TXT Q4 2023
Operator, Operator
Thank you for standing by. Welcome to the Textron Fourth Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. This conference is being recorded for digital replay and will be available after 10 a.m. Eastern Time today through January 24, 2025, at midnight. You may access the replay service by dialing (866) 207-1041 and entering the access code 4065507. I would now like to turn the conference over to David Rosenberg, Vice President of Investor Relations. Please go ahead.
David Rosenberg, Vice President of Investor Relations
Thanks, Leah, and good morning, everyone. Before we begin, I'd like to mention we will be discussing future estimates and expectations during our call today. These forward-looking statements are subject to various risk factors, which are detailed in our SEC filings and also in today's press release. On the call today, we have Scott Donnelly, Textron's Chairman and CEO, and Frank Connor, our Chief Financial Officer. Our earnings call presentation can be found in the Investor Relations section of our website. Revenues in the quarter were $3.9 billion, up from $3.6 billion in last year's fourth quarter. Segment profit in the quarter was $384 million, up $78 million from the fourth quarter of 2022. During this year's fourth quarter, adjusted income from continuing operations was $1.60 per share, compared to $1.23 per share in last year's fourth quarter. Manufacturing cash flow before pension contributions totaled $380 million in the quarter, up $12 million from last year's fourth quarter. For the full year, revenues were $13.7 billion, up $814 million from last year. In 2023, segment profit was $1.3 billion, up $191 million from '22. Adjusted income from continuing operations was $5.59 per share as compared to $4.45 per share in '22. Manufacturing cash flow before pension contributions was $931 million, down $247 million from '22. With that, I'll turn the call over to Scott.
Scott Donnelly, Chairman and CEO
Thanks, David, and good morning, everyone. Our businesses closed out the year with another solid quarter, showing strong margin performance and cash generation. Throughout the year, our team has worked to mitigate supply chain challenges to deliver products to our customers. At Aviation, while we ended the year with an expectation of a book-to-bill ratio of 1:1, solid order flow and customer demand across our product portfolio resulted in a year-end backlog of $7.2 billion, an increase of $782 million. Textron Aviation Defense delivered 13 T-6 aircraft for the year, up 10 from a year ago. During 2023, solid aircraft utilization within the Textron Aviation product portfolio resulted in a 6.5% growth in aftermarket revenues. At Bell, revenues in the quarter were up, driven by higher commercial and military revenues. On the commercial side of Bell, we delivered 91 helicopters in the fourth quarter, up from 71 in last year's fourth quarter. For the full year, we delivered 171 helicopters in 2023, down from 179 in 2022. The higher military revenues reflected the continued ramp on our FARA program. On the FARA program, Bell completed the installation of the ITEP engine on the 360 Invictus. The team continues to conduct integration activities and prepare the aircraft for initial ground runs in 2024. Moving to Textron Systems, revenue and margin were flat with last year's fourth quarter. During the quarter, Systems delivered the last detailed design and construction craft on the Ship-to-Shore Connector program following its successful completion of acceptance trials. Moving to Industrial, we saw higher revenues in the quarter, driven by higher volume in Caltex and favorable pricing in specialized vehicles. In Aviation, Pipistrel delivered 135 aircraft during the year, up from 61 in 2022. Also at eAviation, during the quarter, the Pipistrel Bells Electro was selected to participate in a trial period to explore operational and trading uses for this all-electric aircraft as part of Agility Prime, the Air Force's vertical lift program. Summary, in 2023, we had a strong year across all of our businesses. We continue to execute our growth strategy of ongoing investments in new products and programs to drive organic growth and margin expansion. During the year, Aviation announced the new Cessna Citation Ascend at EBACE and the Cessna Citation CJ3 Gen2 at NBAA. In May, Aviation delivered the first passenger variant of the Cessna SkyCourier to Lanai Airlines servicing the Hawaiian Islands. In the third quarter, Aviation announced a new fleet agreement with NetJets for up to 1,500 aircraft over 15 years, including longitude, latitude, and the newly announced Ascend, extending our 40-plus year relationship. In October, Aviation delivered the 100th Cessna Citation Longitude. At Bell, we began work on the FARA program in April. The team continues to increase activity on the program, ramping up engineering resources, contracting with key suppliers, and ordering long-lead materials. At Textron Systems, we advanced through the future tactical unmanned aircraft system competition and are now one of two remaining competitors, down from the initial five. Systems also continued to win land vehicle programs, advancing to the next phase of the Army's XM30 program as part of Team Lynx and was selected as one of four competitors to build RCV light prototypes for the Army. At Textron Specialized Vehicles, we introduced the new street-legal EasyGo Liberty LSV powered by our elite lithium-ion battery system. At Caltex in 2023, we announced the first pentatonic order from an automotive OEM for a thermoplastic composite underbody battery protection skid plate, establishing Caltex as a supplier to the expanding battery electric vehicle market. In Aviation during the year, we began system-level integration of the first Nuuva prototype, our hybrid electric unmanned cargo VTOL aircraft, in preparation for first flight in 2024. As we closed out 2023, manufacturing performance was trending positively with improvements in labor productivity and supplier deliveries. Looking to 2024 in Aviation, we are projecting growth driven by increased deliveries across all product lines and higher aftermarket volume. At Bell, we expect revenue growth in 2024 on higher military revenues from the FARA program and higher commercial revenues from increased deliveries. At Systems, we are expecting slightly higher revenue as new programs continue to ramp. At Industrial, we anticipate flat revenues as growth in specialized vehicles is offset by lower-than-expected volume at Caltex. In Aviation, we plan to continue investments in the development of technologies and products supporting sustainable flight solutions for unmanned cargo, next-generation electric trainers, eVTOL, and general aviation. We also expect higher aircraft deliveries at Pipistrel. With this overall backdrop, we are projecting revenues of about $14.6 billion, up 7% from 2023 for Textron's 2024 fiscal year. We're projecting adjusted EPS in the range of $6.20 to $6.40. Manufacturing cash flow before pension contributions is expected to be in the range of $900 million to $1 billion. With that, I'll turn the call over to Frank.
Frank Connor, Chief Financial Officer
Thanks, Scott, and good morning, everyone. Let's review how each of the segments contributed, starting with Textron Aviation. Revenues at Textron Aviation of $1.5 billion were down $58 million from the fourth quarter of 2022, reflecting lower volume and mix of $158 million, partially offset by higher pricing of $100 million. Segment profit was $193 million in the fourth quarter, up $23 million from a year ago, reflecting a favorable impact from pricing net of inflation of $51 million, partially offset by lower volume and mix of $22 million. Backlog in the segment ended the quarter at $7.2 billion. Moving to Bell, revenues were $1.1 billion, up $255 million from last year's fourth quarter, reflecting higher commercial revenues of $171 million largely driven by increased deliveries and higher military revenues of $84 million related to the FARA program. Segment profit of $118 million was up $55 million from a year ago, primarily driven by higher volume and mix of $39 million. Backlog in the segment ended the quarter at $4.8 billion. At Textron Systems, revenues were $314 million and flat with last year's fourth quarter. Segment profit of $35 million was equal to last year's fourth quarter. Backlog in the segment ended the quarter at $2 billion. Industrial revenues were $961 million, up $54 million from last year's fourth quarter, largely reflecting higher volume and mix at Caltex and a favorable impact from pricing at Textron Specialized Vehicles. Segment profit of $57 million was up $14 million from the fourth quarter of 2022, primarily due to higher pricing net of inflation of $18 million. Textron eAviation segment revenues were $10 million, and the segment loss was $23 million in the fourth quarter of '23, which reflected the research and development costs for the initiatives related to the development of sustainable aviation solutions. Finance segment revenues were $12 million and profit was $4 million. Moving below segment profit, corporate expenses were $45 million, net interest expense was $13 million, LIFO inventory provision was $21 million, intangible asset amortization was $9 million, and the non-service components of pension and postretirement income was $60 million. In November, we announced a restructuring plan that resulted in pretax special charges of $126 million in the fourth quarter. We anticipate the restructuring plan will be substantially completed in the first half of 2024, resulting in annualized cost savings of approximately $75 million. Our manufacturing cash flow before pension contributions was $380 million in the quarter. For the year, manufacturing cash flow before pension contributions totaled $931 million, down $247 million from the prior year. In the quarter, we repurchased approximately 3.7 million shares, returning $283 million in cash to shareholders. For the full year, we repurchased approximately 16.2 million shares, returning $1.2 billion in cash to shareholders. Turning now to our 2024 outlook on Slide 7. We're expecting adjusted earnings per share to be in the range of $6.20 to $6.40 per share. We're also expecting manufacturing cash flow before pension contributions to be about $900 million to $1 billion. Moving to segment outlook on Slide 8 and beginning with Textron Aviation, we're expecting revenues of about $6 billion. Segment margin is expected to be in the range of approximately 12% to 13%. Looking to Bell, we expect revenues of about $3.5 billion. We're forecasting a margin in the range of 9.5% to 10.5%. At Systems, we're estimating revenues of about $1.25 billion, with a margin in the range of about 11% to 12%. At Industrial, we're expecting segment revenues of about $3.8 billion and a margin in a range of 6% to 7%. At eAviation, we're expecting revenues of $50 million and a segment loss of $25 million, reflecting our continued investment in sustainable aviation solutions. At Finance, we're forecasting segment profit of about $30 million. Looking to Slide 8, we're projecting about $160 million of corporate expense. We're also projecting about $90 million of net interest expense, $110 million of LIFO inventory provision, $35 million of intangible asset amortization, and $265 million of non-service pension income. We expect a full-year effective tax rate of approximately 17.5%. Turning to Slide 10, R&D is expected to be about $550 million, down from $570 million last year. We're estimating CapEx will be about $425 million, up from $402 million in 2023. Our outlook assumes an average share count of about 191 million shares in 2024. That concludes our prepared remarks. So, Leah, we can open the line for questions.
Operator, Operator
Thank you. And I would now like to start with Sheila Kahyaoglu with Jefferies. Please go ahead.
Sheila Kahyaoglu, Analyst
Good morning, Scott, Frank, and welcome, David. Scott, maybe first one for you. How do we think about 2024 aviation deliveries and just book-to-bill in the context of your guidance?
Scott Donnelly, Chairman and CEO
Sure, Sheila. I think we'll continue to see a ramp on the production side. As I noted, I think we did in the fourth quarter start to see some improved productivity on the line. There are still some supplier issues, but the number of parts coming into purchase orders is improving somewhat. So I think that will help us continue to increase volume here as we go through into 2024. So I certainly see unit deliveries being up on a year-over-year basis; the market is still strong. I mean, obviously, our book-to-bill covers '24 deliveries quite well. But I think our expectation, as we said coming into the year, was targeting a 1:1 book-to-bill ratio. We did better than that obviously in 2023, but our assumption as we go into 2024 is that we'll see a 1:1 book-to-bill ratio. So the market is still good. I think we're seeing nice stimulation in some of the new products coming out, like the CJ3 Gen2, which has been really well received. Ascend, I think will also drive strong demand. Overall, the product lineup is in good shape. So I think market-wise, we're good, and we will see, obviously, to get to the guide of around $6 billion on the Aviation side, we will see continued volume on both aircraft production as well as aftermarket growth.
Sheila Kahyaoglu, Analyst
Can we get to about 200 deliveries in '24? Do you think that's reasonable?
Scott Donnelly, Chairman and CEO
We don't provide a specific number, but it will be higher than in 2023.
Sheila Kahyaoglu, Analyst
Got it. And if I could ask one on FLRAA, just good progress on the program with ITEP. But I think revenues were about $175 million in 2023, fell short of our expectations. And how do we think about 2024, we have about $850 million of FLRAA according to the budget. So…
Scott Donnelly, Chairman and CEO
I believe our revenues for FLRAA were likely higher than what you've mentioned, probably approaching a few hundred million dollars for the year. While I can't provide all the specifics, we do anticipate positive progress as we move into 2024. Although the initial figures were lower than we had hoped due to delays earlier in the year, the program has been performing well since the contract was awarded. Therefore, I expect the revenue for the FLRAA program in 2024 to be closer to the $900 million range.
Sheila Kahyaoglu, Analyst
Thank you.
Operator, Operator
Next, we go to a question from Peter Arment with Baird. Please go ahead.
Peter Arment, Analyst
Yeah. Good morning, Scott, Frank, David. Just maybe circle back just on how you're thinking about kind of the margin leverage in Aviation, Scott, when you think about just because you called out some of the pricing that you continue to get. How are we thinking about just kind of that flowing through? I mean just given the margin outlook of 12% to 13%, kind of at the low end of the range, it's flat, but at the upper end, obviously, 100 basis points. Just how are you thinking about that?
Scott Donnelly, Chairman and CEO
Sure. Look, Peter, I think we definitely expect to continue to see pricing net of inflation is a positive for us. It won't be as significant as it was in 2023, but we still have good pricing in the backlog, and I think it will be a tailwind for us. If you look at the guide and the numbers, you're right. Look, I mean, as I said, I think we saw some improved performance in Q4 on the manufacturing conversion side. So we're baking some of that in as we go into 2024, but as you move towards the high side of the guidance, you get up into that 20-plus percent conversion, which is where we historically like the business to be. So it's something we've got to work on, obviously. We still have some of those headwinds that we faced this year on the operating side, but the combination of improved performance and continued price over inflation is positive, while it's not as big a positive, I think, it will help us get towards that 20-plus range.
Peter Arment, Analyst
Got it. That's helpful. And then just Frank quickly, the interest expense increase, just maybe what's going on there specifically? Thanks.
Scott Donnelly, Chairman and CEO
Well, yeah, go ahead.
Frank Connor, Chief Financial Officer
Yeah, a little. We've got slightly higher borrowing costs from the bond deal that we did last year. So that's a little bit of the rollover on the financing. It assumes slightly lower cash balances and a little bit of conservatism around the interest rate that we earn on that excess cash.
Peter Arment, Analyst
Thanks again. Thanks, Frank.
Operator, Operator
And next, we go to David Strauss with Barclays.
David Strauss, Analyst
Thanks. Good morning, everyone.
Scott Donnelly, Chairman and CEO
Good morning, David.
David Strauss, Analyst
Scott, I wanted to ask about the V-22 grounding. Does that impact Bell at all? I know you have a pretty big aftermarket business on the V-22?
Scott Donnelly, Chairman and CEO
No, David, I don't believe it's a significant impact. The services are taking advantage of the grounding to continue their maintenance activities and prepare the aircraft for flight. So we probably can't provide much more information about that situation. But no, I don't anticipate it to have a significant impact.
David Strauss, Analyst
Okay. And Frank, free cash flow, the guidance were flat; I know you had a pretty big inventory build in '23, but you also had positive advances. What are you assuming for working capital? And in terms of the adjusted EPS guide, what are you baking in as far as share count and share repurchase in '24? Thanks.
Frank Connor, Chief Financial Officer
From a cash perspective, we expect to see volume growth this year, which will put some ongoing pressure on inventory levels as we look toward growth in 2024 and 2025, although not significantly. There is also some working capital pressure due to the timing of customer payments, especially in the military sector. Bell, in particular, had a very strong year in 2023 regarding payment timing, which creates a bit of a challenge for cash flow. Additionally, we have slightly increased our capital expenditure guidance. It's not due to any single factor but rather a combination of minor headwinds related to working capital and higher investment levels. Nonetheless, we anticipate solid cash flow performance for the year. Regarding share count, we expect an average of 191 million shares, representing approximately a 5% reduction in average share count for the year.
David Strauss, Analyst
Thank you.
Operator, Operator
Next, we go to Jason Gursky with Citi. Please go ahead.
Jason Gursky, Analyst
Yeah. Good morning, everybody. Scott, I was wondering if you could just spend a few more minutes on systems and talk about the pipeline of opportunities there and the timing of potential awards, considering what's going on with the budget and whether things like continuing resolutions to go out half a year have any impact on your expectations around those?
Scott Donnelly, Chairman and CEO
The current CR situation doesn't concern me much regarding the system side. As we mentioned, Jason, we expect to see relatively flat revenue in 2024. The pipeline looks strong, especially with several important down selects on FTUAS, the ARV program, and what was previously the other program. These represent significant opportunities for us and were crucial down selects achieved last year. We will move forward with those, and since they are not major growth programs, they don't raise any major CR concerns for me. Most programs will have their next significant contractual award down select in 2025, which is why we're projecting a flat outlook. I believe 2023 was a critical year for the down selects on these key programs, and as we implement this year, we should start to see revenue growth from the final selection awards and EMD programs set to be awarded in 2025.
Jason Gursky, Analyst
Okay. Great. Thank you. And then just quickly on eAviation. We've got widening profitability losses, they're projected for '24 on higher revenue. I was wondering if you could just kind of give us a broad brush update on the plans for that business? And at what point does the revenue potentially pick up here and you begin to see those profitability losses begin to contract? And kind of your overall vision for that business over the next, I don't know, three to five years?
Scott Donnelly, Chairman and CEO
Sure. There are two main aspects in the eAviation segment. First is Pipistrel, which is an established business with real sales, and we expect to see a doubling of aircraft sales from 2022 to 2023, and again from 2023 to 2024. The product lineup at Pipistrel is performing well, and we are expanding our distribution channels. While it's a smaller business, it is doing well overall. The losses are primarily due to investments in research and development, especially with the Nexus program, which will likely not generate revenue for several years, as well as investment in the Nuuva 300, our hybrid unmanned cargo vehicle, which is also a few years away from generating revenue. This is why we made these investments clear, as they are not directly linked to the segment's revenue. The two significant areas of investment are the Nuuva for unmanned cargo and the Nexus for electric vertical takeoff and landing, which aren't solely reliant on urban air mobility but on general aviation as well. Both teams are in good shape, and we expect the Nuuva's first flight in 2024. We have also started assembling the wings and fuselage for the Nexus program in Wichita. Both projects are advancing well and are focused on technology investment.
Jason Gursky, Analyst
Okay, great. Thanks.
Scott Donnelly, Chairman and CEO
Sure.
Operator, Operator
Next, we go to the line of Noah Poponak with Goldman Sachs. Please go ahead.
Noah Poponak, Analyst
Hey, good morning, everyone.
Scott Donnelly, Chairman and CEO
Good morning, Noah.
Noah Poponak, Analyst
Scott, we've heard some discussion in the business jet end market that even though 2023 was a decent order year that there's actually maybe some pent-up demand because it was so consensus that there was going to be a recession or something like it. And that in 2024, if we're having an inflation deceleration and rate cuts and some version of a soft landing, that you could have your normal underlying demand plus anybody that deferred from '23. I'm curious if you hear that from your customers or your sales force and there's an upside case for bookings? Or is that too aggressive and just stick with a book-to-bill of 1?
Scott Donnelly, Chairman and CEO
We feel optimistic about the end market. Customer interactions are strong. The main challenge we face is availability, as customers want their aircraft sooner. Our sales team is working diligently, and there is definitely demand. This is further supported by the introduction of new models that are expected to be well-received in the market. Overall, while the book-to-bill figure may fluctuate from quarter to quarter, we feel confident about the end market. We plan to maintain our one-to-one base assumption, similar to 2023. If the market stays strong, we could surpass that figure, which would be excellent. In summary, we believe the market remains robust and we are pleased with the outlook.
Noah Poponak, Analyst
Okay. Can you elaborate on how much improvements have been made in supply chain, labor, and your capability to deliver airplanes? The delivery number was down in 2023 despite high demand, which ties into your points about availability. Whatever the delivery plan for 2024 is, it needs to increase significantly to meet the revenue guidance. Do you believe you will be ready to start strong in January? Additionally, regarding the margin, why wouldn't the pricing, after accounting for inflation, be better if pricing remains strong? I understand that the rate of change is important, but if the issues related to cost inflation and disruptions ease significantly for you, what are your thoughts?
Scott Donnelly, Chairman and CEO
Well, look, I'd say I don't know how to quantify the exact number for you, Noah, but there's a couple of dynamics here that make us feel good about it. Again, we saw better labor productivity, all the metrics we track in terms of training hours, direct charging to labor hours, applied hours, were positive in the quarter. We do track a number of parts that are late to purchase order. These numbers are getting better. Also, I think as you look at the '23 to '24, we have net less hiring we need to do to hit the ramp. Last year was a big year in terms of onboarding new people. As you can imagine, that's very disruptive. It's a lot of training that takes not just the new people, but it takes a lot of our capable people to help train and develop them. We made a lot of investments in 2023 around new training facilities. But the absolute number, we still need to onboard new people, for sure. But the number of them is less than what it was in 2023, and that should be helpful. The supply chain thing, as I said, look, it is getting better, but it's still susceptible to the wrong part not being available, right? I mean, I think it's going to help us do less out-of-station work, but we still have suppliers we're keeping a close eye on because a lack of delivery on their part could hold up an aircraft. So we're still being cautious about how we work through that, but it has improved. As I said, there is less hiring. I think most of our lines are flowing better as a result of all the things I just talked about. So we do factor that into our ability to hit that larger number of aircraft deliveries in '24, and I think we'll get there.
Noah Poponak, Analyst
Okay. That's good. I'm just going to ask one more. The Bell margin, pretty strong in the quarter, close to '23, well ahead of the initial plan. This '24 guide, 9.5% to 10.5%, kind of flat year-over-year. There was a view that this was going to 7%, 8% as you ramped FLRAA; you're ramping FLRAA, that's not happening. Can you talk about how you're outperforming there and absorbing the FLRAA ramp? Is '24 the trough or does that still need to go down some number of hundreds of basis points before then going back up?
Scott Donnelly, Chairman and CEO
Noah, the team is actively working to manage costs and take appropriate actions as we see a decrease in some military production programs. This is certainly a better situation compared to a large cost-plus EMD program. We will still experience some pressure on margin rates, but we believe the growth from the ramp-up of this program will lead to positive financial contributions. Even with some margin rate pressure, the business will continue to make a positive impact on overall revenue and earnings per share.
Noah Poponak, Analyst
Okay. All right. Thanks.
Operator, Operator
And next, we go to the line of Myles Walton with Wolfe Research. Please go ahead.
Myles Walton, Analyst
Thanks, good morning. I was hoping to circle on Aviation. In the last few quarters, there's been more discussion of this performance as a negative variance to the profit walk. That wasn't part of the conversation. It was clearly price offset by a little bit of volume. So is it fair to think that that bucket of performance that you all cite has materially become nonmaterial?
Scott Donnelly, Chairman and CEO
I wouldn't categorize it as non-material. In 2023, we experienced considerable benefits from price overinflation, which helped mitigate some performance issues caused by labor inefficiencies and supplier impacts. Looking ahead to 2024, we anticipate improved margins and significantly increased revenue, which will lead to higher operating profit for the business. However, while we expect some positive price over inflation, it will not be as substantial as before. Fortunately, we will face fewer performance challenges because we anticipate better efficiencies in our factories and reduced supply impacts. Overall, the situation will be different in 2024 compared to 2023. The key takeaway is that we will see notable revenue growth and substantial operating profit, along with expanding margins in 2024.
Myles Walton, Analyst
Okay. And then on the restructuring program, you executed, I think, about 60% maybe was directed at Bell. Of the $75 million gross savings you talked about, how much net savings is Bell getting in '24? And also, is Bell getting most of the lower R&D benefit?
Scott Donnelly, Chairman and CEO
We are not going to break that down in detail, but the conversation I had with Noah about the improved margins at Bell relates to our restructuring efforts aimed at controlling costs while managing the reduction in volume of some historic military production programs. This is contributing to better margin rates even as those programs wind down. We need to reduce costs in the areas that were primarily supporting these large military production initiatives. While I can't provide an exact number, this is a factor that is helping to enhance our margins.
Myles Walton, Analyst
And is R&D drop there mostly in Bell?
Scott Donnelly, Chairman and CEO
It is. I mean, as you know, we don't break that all the way out. But look, we still had, as you recall, the delay of the FLRAA program in 2023; we had more of our own costs still sustaining and supporting that program in the earlier part of the year. Obviously, as that has ramped and become a full-blown contract, that's helping to reduce that number. The overall gross R&D, the business is still growing significantly as FLRAA ramps, but the net number in terms of the IRAD side is certainly shifted from that IRAD into the contract over.
Operator, Operator
And the next question we have is from Kristine Liwag with Morgan Stanley. Please go ahead. She has disconnected. We will move on to the next line of Robert Stallard with Vertical Research. Please go ahead.
Robert Stallard, Analyst
Thanks so much. Good morning.
Scott Donnelly, Chairman and CEO
Hi, Robert.
Robert Stallard, Analyst
Scott, I’d just like to follow up on Noah's question about the supply chain and the parts behind at the moment. Are there any specific areas where you're seeing any problems like interiors that are holding things up?
Scott Donnelly, Chairman and CEO
Nothing that I would comment on a call. We all have our problem children.
Robert Stallard, Analyst
Yeah. Understood. And then secondly, there's been some press reports that Textron has been looking at some M&A competitions in recent months. I don't expect you to comment on that. But I was wondering if you could maybe reiterate your priorities for capital deployment as we start 2024?
Scott Donnelly, Chairman and CEO
Sure. No, we definitely would not comment on that. And look, I think what we've talked about, and Frank's indication on the share count of 191 million obviously indicates that our priority continues to be share buybacks, and that we think at this point, is a pretty significant benefit for our shareholders. That's what we expect to continue to do in 2024.
Robert Stallard, Analyst
Okay. That’s great. Thanks, Scott.
Operator, Operator
And our next question is from Seth Seifman with JPMorgan. Please go ahead.
Seth Seifman, Analyst
Hey, thanks very much and good morning, everyone. I guess just asking about the performance at Aviation and kind of the improvement in productivity and parts availability that you started to see in the fourth quarter. Does that mean that in the first quarter we can expect to see kind of a nice increase in deliveries and something that would kind of affirm the notion of being on track for the revenue guide for the year?
Scott Donnelly, Chairman and CEO
Well, we're not going to get into quarterly guidance for sure, Seth. I mean, you certainly should expect to see a nice progression in terms of the revenue on a quarter-to-quarter basis over 2023, consistent with the guide of $6 billion of revenue for the total year.
Seth Seifman, Analyst
Okay. Great. Following up on Rob's question, I understand you might not discuss specific M&A reports. However, the ones we've seen mainly focus on the space end market. Can you share your perspective on whether you consider that an important or appealing market for expansion?
Scott Donnelly, Chairman and CEO
I wouldn't comment.
Seth Seifman, Analyst
Fair enough. All right. Thank you very much.
Scott Donnelly, Chairman and CEO
Thanks, Seth.
Operator, Operator
And next, we go to the line of Kristine Liwag with Morgan Stanley. Please go ahead.
Kristine Liwag, Analyst
Hey guys. Can you hear me okay?
Scott Donnelly, Chairman and CEO
Yep, we can hear you fine.
Kristine Liwag, Analyst
Okay, great. Hey, Scott, Frank, Dave. Thanks. On your restructuring actions, can you provide more details on what you're doing and what your expectations are for the timing and the size of the payback from your investments?
Scott Donnelly, Chairman and CEO
Well, Kristine, as we mentioned, a significant portion is being allocated to Bell, which is essentially aligning our cost structure with the lower production rates of some historical military programs like H1 and V-22. This adjustment, particularly in terms of cost and the workforce mix, is beneficial overall, especially in the engineering program side of the FLRAA program. It’s a necessary step to align costs with the older production programs. Additionally, we are adjusting our plans in the automotive sector to better understand global demand and to ensure that we maintain a healthy business with strong returns and cash flow. There are various initiatives underway in several areas. However, we believe that on a run-rate basis, this will positively impact the business by approximately $75 million per year. I think that represents a solid return, which is why we chose to move forward with the program.
Kristine Liwag, Analyst
Thank you for the information. On Aviation, I would like to ask a follow-up question. A $100 million pricing power for new aircraft is quite robust. If you are still experiencing bottlenecks in new aircraft production, could you discuss the demand landscape for aircraft services? Additionally, what is the pricing power for services given the limited supply of new airplanes entering the market?
Scott Donnelly, Chairman and CEO
Look, I think what we saw this year, which was strong growth, 6.5% on the services side. Obviously, that's a mixture between volume and pricing. I expect we'll continue to see good demand on that side. We certainly have that baked into our forecast. Aircraft are flying. Our customers are running the aircraft. They're doing the necessary maintenance. I think it will continue to be a healthy part. Certainly, what we've incorporated into the guide for next year is good growth in the service business, both our service centers as well as the parts. And as always, that's going to be a function of both volume increases as well as annual expected pricing in the aftermarket side.
Kristine Liwag, Analyst
Great. Thanks, Scott.
Operator, Operator
Next, we go to the line of George Shapiro with Shapiro Research. Please go ahead.
George Shapiro, Analyst
Yes, good morning.
Scott Donnelly, Chairman and CEO
Good morning, George.
George Shapiro, Analyst
Scott, I was just curious, you were saying that the supply chain seems better, yet the deliveries in the fourth quarter were a lot lighter than what most of us were looking for. So if you could kind of just connect the two dots there?
Scott Donnelly, Chairman and CEO
Look, George, as you know, it takes many months to build an aircraft. So the improvements in both the labor side and the parts side takes a while to push through the system. So the higher cost and a lot of the impacts that we kind of saw throughout the year were full-year impacts. But I do feel like as we look at the numbers, and what we experience on a day-to-day basis, we did see improvements. As a result, you'll start to see that improvement as you get into 2024.
George Shapiro, Analyst
And then one other one. The book-to-bill in the quarter was 0.9 and the orders were only $1.4 billion. So that was really down a lot from last year as well as the third quarter now. I guess you're just looking at it as timing or does anything to do with Noah's comment that people are concerned about a recession in the fourth quarter? Do we get a pickup this year? But if you could just comment on that as well.
Scott Donnelly, Chairman and CEO
George, I believe this is primarily related to timing. We often experience some variability regarding when deposits arrive from our larger customers, but I don't think there's anything alarming about that. We have always indicated that there will be some quarters where the ratio will be below 1:1, and possibly some where it exceeds 1:1. However, our expectation for the full year going back to 2023 was 1:1, and we actually performed better than that. For 2024, we anticipate it will remain at 1:1, but we will need to observe how the market develops. Nonetheless, we remain optimistic about the end market and demand, which still seems to be robust.
George Shapiro, Analyst
One last one. The strong Bell margin in the quarter, I mean, does that just really reflect the commercial delivery strength, which has much higher margins, more than offsetting the drag from the lower-margin FLRAA program? And if that would continue next year, the margins would probably be somewhat higher than what you've guided to?
Scott Donnelly, Chairman and CEO
George, I think we're continuing to see good margins on our military business, obviously outside of the FLRAA side. It certainly helps to have higher commercial deliveries. I think we'll see some benefit from higher commercial deliveries, as we talked about, in 2024. But look, there's going to continue to be some pressure on the margin just because we are seeing significant growth in the FLRAA program. The reason we did the cost action and did the restructuring was to try to shore up the profitability of the business on the legacy production programs. And so part of the guide is, obviously, we continue to see some benefit from that. But again, there will be overall margin rate pressure going into the future. But I think as we talked about, even with that and the growth of the FLRAA program, we're going to see significant revenue growth, and we're going to see absolute profit increases and accretion to EPS for the business. So I think as we work through a transition from legacy production to a new EMD program, we can manage our way through that well. Long-term, it's going to be a great story for Bell. Sure.
Operator, Operator
Next, we move to Pete Skibitski with Alembic Global. Please go ahead.
Pete Skibitski, Analyst
Hi, good morning, guys. Scott, can you expand on your opening comments regarding Caltex and your expectations there in 2024? It sounds like you think you might be a little bit weak there. Just was wondering what the drivers were?
Scott Donnelly, Chairman and CEO
Sure, Pete. Look, that's one business where we really depend on sort of industry customer forecasts. So our guide reflects that. We don't really apply a whole lot of our own judgment to that. We really go with where the industry tells us they're going, and we've got to see how the year plays out. I think we feel good about the business. Some of the restructuring we did was reflective of where the volume growth is and where the volume growth isn't. But the business is in a healthy place, and the margins have been doing better as we've come out of all the post-COVID challenges, and the volumes will be consistent with global auto OEM numbers.
Pete Skibitski, Analyst
Okay. Got it. And then I had a couple of questions on Aviation. Are you expecting Caravan sales deliveries to be up in '24? I know you delivered a lot of them to Asia, and we're seeing some softness in China. So just wondering what you're seeing there?
Scott Donnelly, Chairman and CEO
Look, Peter, I mean, we're not going to get into model-by-model discussions. But I would say net of everything, the turboprop market is doing really, really well. As you know, that tends to be more international. I think we usually give the numbers, roughly 60% international versus the jet side, which is 80%. But I think our Turboprop business is in a really good place. I think Caravans will do well. I think King Airs are going to be strong. We continue the ramp on the SkyCourier. So we tend to get most of the questions around Jet. But look, I think the turboprop business is in a very good place, and we certainly expect to see that business continue to grow in 2024.
Pete Skibitski, Analyst
Okay, great. Thank you.
Operator, Operator
Next, we go to the question from Cai von Rumohr with TD Cowen. Please go ahead.
Cai von Rumohr, Analyst
Yes, thank you. So, Scott, at Bell, are you anticipating that part of the profit strength in 2024 will come from the closeouts of the V-22 and the H1? Additionally, is there any concern regarding FLRAA volume due to an extended continuing resolution?
Scott Donnelly, Chairman and CEO
So, Cai, regarding 2024, we will see some contracts ending, which will result in some MR release. However, I believe we can manage that effectively. For instance, in Q4, we had approximately $8 million in EACs, which is not a significant figure and remains flat year-over-year. I do expect some reserve release next year, as we typically do as we proceed with these programs. The cost-cutting efforts we are implementing, along with growth in commercial revenue and FLRAA revenue, will help maintain a good margin rate for 2024. Concerning the CRR, I believe we are in a manageable situation. If the CRR extends throughout a full year, it may create some challenges, but the Army likely has backup plans to adjust funding. FLRAA is also a high-priority program for them. It would certainly be easier if Congress would finalize the budget. For now, I think we will be able to navigate through any issues, provided it doesn't extend for a full year.
Cai von Rumohr, Analyst
Got it. And last one. At Aviation, can you give us some color in terms of where the order strength is in terms of fractionals versus high net worth versus corporate?
Scott Donnelly, Chairman and CEO
It's pretty stable, Cai. We aren't seeing a change from where we were. We don't break all that out, obviously, but the demand has been pretty strong. In terms of mix, as you know, jet stuff tends to be more domestic, roughly 80-20, the turboprop is more like 60-40 international. We haven't seen big changes in that. We haven't seen big changes in the mix between what goes through the fractional world and what goes through the whole aircraft side; end demand continues to be, we think, pretty strong across the board.
Cai von Rumohr, Analyst
Thank you very much.
Operator, Operator
Next, we go to a question from Doug Harned with Bernstein. Please go ahead.
Doug Harned, Analyst
Good morning, thank you. Scott, in the past, you commented on the supply chain that you'd actually seen more challenges at Bell than you had in Aviation. Given the strong margins at Bell, can you comment on where that stands today?
Scott Donnelly, Chairman and CEO
Well, look, this is one of the challenges we faced. We had some significant impacts at Bell in the earlier part of the year around a very small number of suppliers. A couple of those suppliers either got healthier in some cases, we brought some work inside and exited those suppliers. So when you do that, we had a situation at Bell with a couple of the aircraft models where we had very specific supply issues that we were able to resolve. And as a result, Q4 had a pretty strong delivery number on a year-over-year basis. So again, this is the challenge, while the absolute number of parts might be getting less, you can still have a part problem that has a significant impact. So that's just the nature of the business and what our guys work through every day. I think we did resolve a couple of critical issues in the latter part of the year at Bell that enabled those higher deliveries, and obviously, we've got to keep working.
Doug Harned, Analyst
And then if I go back to the Aviation side and the end market, one of the things we've seen is more pre-owned airplanes out there for sale; higher percentage. We're still not back at kind of historical norms. But you were commenting that you're seeing a little bit less pricing benefit relative to inflation. I mean, are you seeing any potential pressure here from pre-owned, and as you look at your market?
Scott Donnelly, Chairman and CEO
No, we're not. Look, first of all, as you noted, it's up versus where it was, which was at ridiculously low levels. It's still at historically lower levels than normal. We keep a very close eye on this. They're mostly much older aircraft, right? So the phenomenon that people kind of refer back to is, geez, do you have aircraft competing with new aircraft sales? Obviously, there was a time, going back a number of years ago now, where you had relatively new aircraft that were coming on to the market. We're just not seeing that dynamic. When we look at what's out there, what's available for sale in the used market, the number is increasing, but they are considerably older and in large part, out of production aircraft. So no, we're not really seeing an impact of used aircraft out there that are competing with new aircraft sales.
Doug Harned, Analyst
Okay, very good. Thank you.
Operator, Operator
And next, we go to Gavin Parsons with UBS. Please go ahead.
Gavin Parsons, Analyst
Thank you, good morning.
Scott Donnelly, Chairman and CEO
Good morning.
Gavin Parsons, Analyst
I just wanted to circle back to industrial margins and just get a better sense for what's driving that, given I think context had been the section segment underperforming. And then just thoughts on, it seems like in TSV, some of your recreational vehicle competitors are having headwinds. So what's driving the margins and growth there?
Scott Donnelly, Chairman and CEO
We analyze the end markets, both in the auto sector and the vehicle industry. Overall, we expect the industrial sector to remain stable, with improved margins. This outlook is based on industry forecasts; we anticipate a slight decline in Caltex volumes, though margins in that area should continue to rise. In the vehicle segment, we expect modest growth, influenced by some higher-priced discretionary items. However, we do not foresee significant growth in that sector. Altogether, the business is likely to experience modest growth while maintaining strong margin performance. Our observations align with what you see happening with other companies in the market, and this is reflected in our guidance.
Gavin Parsons, Analyst
That's helpful. And maybe just circling back to the NetJets 1,500 over 15 years, I think typically, they firm up about a year out. But on average, that would be 100 deliveries a year. Is that something you need more visibility from them on over a decade of orders?
Scott Donnelly, Chairman and CEO
Well, we don't. You're right. The way we treat the backlog is when those firm up and that is roughly a 12-month period where they actually put deposits down; that's the point at which we move those aircraft into actual backlog. In terms of looking out beyond that, we do work closely with them on forecasting what that demand is going to look like even outside of that one-year firm-up period. We certainly have very, very good dialogue and work with them to collectively anticipate what that demand will be on the fractional side. But we don't firm up and put it into that actual backlog number until roughly, as you said, that one-year window.
Gavin Parsons, Analyst
That makes sense. Thank you.
Scott Donnelly, Chairman and CEO
Sure.
Operator, Operator
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