Fox Corporation stock (NASDAQ: FOXA) is being touted as a better investment pick compared to Textron stock (NYSE: TXT). Despite being from different sectors, these companies share similar revenue bases of around $14 billion and market capitalizations of $16 billion. However, Fox has shown better revenue growth and profitability than Textron. Over the last three years, TXT stock has outperformed FOXA, with a 70% increase compared to Fox’s 15%. Despite this, both companies have underperformed the S&P 500 Index, indicating the challenges of consistently beating the market.
Fox’s revenue growth has been stronger than Textron’s, with an average annual rate of 6.6% compared to Textron’s 5.5%. Textron’s growth has been driven by higher pricing and increased deliveries in its Aviation, Bell, and Industrial segments. Fox, on the other hand, has seen growth in advertising revenues for its Television segment, with a significant rise in advertising sales driving a 31% increase in Television sales between 2020 and 2023. Looking ahead, Fox is expected to see continued sales growth driven by advertising, particularly with upcoming events such as the Presidential election and the Super Bowl.
In terms of profitability, Textron has seen its operating margin expand from 4.4% in 2020 to 7.7% in 2023, while Fox’s operating margin contracted slightly over the same period. However, Fox’s current operating margin of 17.5% is significantly higher than Textron’s 7.8%. While Textron has a lower debt percentage compared to Fox, Fox has a higher cash cushion, making them comparable in terms of financial risk. When considering prospects, Fox is seen as the better choice, with an estimated valuation of $100 per share for Textron, reflecting an upside of around 15% from its current levels.
Overall, FOXA is expected to offer better returns than TXT in the next three years based on its stronger revenue growth, profitability, and solid prospects, particularly in the advertising sector. While both companies face uncertainty in the current macroeconomic environment, Fox’s performance is expected to outweigh that of Textron. Despite Textron’s better debt position, Fox’s overall financial health, growth potential, and valuation make it a more attractive investment option. Investors may find other valuable comparisons for companies across industries through peer comparisons.
