) announced fourth quarter and full year 2012 results. The
company reported fourth-quarter adjusted earnings of $1.60 per
share, beating the Zacks Consensus Estimate by 30 cents. However,
results were lower than the year-ago quarterly earnings of $1.72
For full year 2012, the company reported adjusted earnings of
$6.21 per share comfortably surpassing the Zacks Consensus
Estimate of $4.94 per share and the year-ago figure of $5.85 per
share. The results were driven by capital deployment actions and
Revenue reported by Raytheon in the quarter under review was
$6.44 billion, up marginally by 0.26% from $6.42 billion in the
year-ago period. The top line also surpassed the Zacks Consensus
Estimate by $19 million. Full year 2012 sales were $24.4 billion,
down 1.5% year over year. However, full-year revenue was above
the Zacks Consensus Estimate by $21 million.
In the fourth quarter of 2012, customer demand for advanced
technologies and affordable solutions resulted in strong orders.
The company reported strong bookings of $7.89 billion versus
$7.15 billion in the year-ago period. As of Dec 31, 2012, backlog
was $36.18 billion compared with $35.3 billion in the year-ago
In the fourth quarter of 2012, total operating expenses were
$5.68 billion, up 1.99% year over year. Year-over-year higher
operating expenses were not offset by higher revenues. Therefore,
total operating income generated by the company in the reported
quarter was $755 million, down 11.1% year over year.
Integrated Defense Systems (IDS):
Revenue increased 2.3% year over year to $1.32 billion in the
quarter driven by higher sales on a missile defense radar program
for an international customer. In the fourth quarter of 2012, the
segment received $332 million for the production and sustainment
of AN/TPY-2 radars, a $293 million contract to provide technical
and logistics support for a Hawk and Patriot air and missile
It also received a $293 million contract on an Early Warning
Surveillance Radar System (EWSRS) support program, a $251 million
contract on the Zumwalt-class destroyer program and many other
Intelligence and Information Systems (IIS):
Segment revenue increased marginally by 0.26% year over year to
$755 million in the quarter. The segment received $79.0 million
contract on the Joint Polar Satellite System (JPSS) program for
NASA and also booked $511.0 million on a number of classified
Missile Systems (MS):
Revenue increased by 4.2% year over year to $1.54 billion. The
upside reflects higher sales on the Standard Missile-3 (SM-3) and
Rolling Airframe Missile (RAM) programs.
During the fourth quarter of 2012, the segment received $500
million contract for the production of Paveway, $303 million
contract for the production and development of Tomahawk and a
$175 million contract for Evolved Sea Sparrow Missile (ESSM). The
segment also booked a $116 million contract for the
Exoatmospheric Kill Vehicle (EKV).
ALLIANT TECHSYS (ATK): Free Stock Analysis
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LOCKHEED MARTIN (LMT): Free Stock Analysis
RAYTHEON CO (RTN): Free Stock Analysis Report
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Network Centric Systems (NCS):
Revenue decreased only by 0.35% year over year to $1.13 billion
in the quarter. During the quarter, the segment received a
contract worth $650 million on an international Command, Control,
Communications, Computers and Intelligence (C4I) program. It also
received an order on the Navy Multiband Terminal (NMT) program
worth $82 million.
Space and Airborne Systems (SAS):
Revenue of $1.38 billion in the quarter increased 2.7% year over
year driven by higher net sales on an international tactical
airborne radar program. In the reported quarter, the segment
received a contract worth $289 million for an international
sensor program and $76 million for the production of the
Multi-Platform Radar Technology Insertion Program surveillance
Technical Services (TS):
Revenue decreased 6.2% year over year to $831 million in the
quarter. The year-over-year decline reflects lower net sales on a
National Science Foundation (NSF) Polar contract that was
completed in the first quarter 2012.
As of Dec 31, 2012, Raytheon had cash and cash equivalents of
$3.2 billion, down from $4 billion at the end of Dec 2011.
Long-term debt increased to $4.7 billion from the year-end 2011
figure of $4.6 billion.
During the quarter, the company generated operating cash flow
from continuing operations of $0.99 billion compared with $1.3
billion for the fourth quarter of 2011.
As a part of a previously announced share repurchase program, the
company repurchased 1.8 million shares of common stock for $100
million in the fourth quarter of 2012. For full-year 2012, the
company repurchased $15.9 million shares for $825 million.
During the quarter, the company made two important acquisitions:
the Government Solutions business of SafeNet Inc. and Teligy,
Inc. These acquisitions will help the company to serve the
cybersecurity, enterprise architecture, encryption demand and
systems engineering needs of its various customers.
Raytheon expects full-year 2013 net sales to be in the range of
$23.6-$24.1 billion. The company expects 2013 adjusted earnings
per share in the band of $5.65-$5.80. It expects operating cash
flow from continuing operations to be in the range of $2 billion
to $2.2 billion.
Raytheon easily surpassed the Zacks Consensus Estimate. Apart
from focusing on share buy backs, the company is playing well on
a number of contracts. Going forward, revenue and earnings growth
would continue to be driven by its strong and diversified
presence in the areas of Intelligence, Surveillance and
Reconnaissance (ISR); air traffic management; training and
homeland security; and cyber security.
These positives are however offset due to the uncertainty related
to the defense budgets, the fate of high-cost programs, risks
related to key project executions and order cancellations. The
company presently retains a short-term Zacks Rank #3 (Hold).
Other stocks to consider are
Lockheed Martin Corporation
FLIR Systems, Inc.
) that presently carry a short-term Zacks Rank #2 (Buy) and
Alliant Techsystems Inc.
) that retains a short-term Zacks Rank #1 (Strong Buy).