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The defense outlook is looking up and Textron (TXT), a manufacturer of aviation, defense and industrial products, is positioned to be one of the primary beneficiaries.

That’s the key takeaway from a recent HedgeyeTV Black Book presentation in which Hedgeye Industrials analyst and Defense Policy analyst LtGen Emerson "Emo" Gardner USMC ret. collaborated to provide a multifaceted view of Textron’s long-term prospects.

In the excerpt above, Van Sciver discusses Textron’s underappreciated value and Gardner, as a former Department of Defense insider, supplies the defense budget outlook.

Here’s what Van Sciver thinks Wall Street analysts are missing about the company:

  1. Challenges Overblown – this is not a peak cyclical stock; new product introductions and aftermarket opportunities are offsetting softening market conditions
  2. Defense Outlook Favorable – the Pentagon’s Defense budget will be increased by $32 billion and more than likely be submitted to the next Congress with no dramatic reductions
  3. Hidden Growth Potential – the Street numbers are too low so the stock is cheap relative to its opportunities

As Van Sciver says, “This is a name that’s cheap with an evolving story, a growing platform, franchises, technologies and some great investments, so it’s fairly easy to see the narrative shift from a real value name to the realm of growth valuation.”

All told, Van Sciver thinks the stock is worth $50 or more.