Raytheon Beats, Ups EPS Guidance - Analyst Blog


Shutterstock photo

Raytheon Company ( RTN ) reported first quarter 2012 adjusted earnings per share of $1.46, beating the Zacks Consensus Estimate of $1.16. The result was also higher than the year-ago quarterly earnings of $1.37 per share.

During the quarter, on a reported basis, earnings were $1.33 as compared to $1.06 in first quarter of 2011. The difference between reported and adjusted was due to FAS/CAS Adjustment.

Operational Performance

Revenue was $5.94 billion, down 2% from $6.05 billion in the year-ago period. However, it surpassed the Zacks Consensus Estimate by $166 million.

Total backlog at the end of the quarter was $34.3 billion, up from $33.7 billion in the year-ago period.

Operating income was $706 million versus $589 million in the year-ago period.

Segment Performance

Integrated Defense Systems (IDS): Revenue was approximately flat year-over-year at $1.22 billion. The segment received a $182 million contract to provide Patriot engineering services and a $90 million contract to provide engineering services, production and support for the Aegis weapon system. Segment operating income was $216 million, up 11.9% year over year.

Intelligence and Information Systems (IIS): Segment revenue increased 1.87% year over year to $764 million in the quarter driven by recent acquisitions in cyber security. Segment operating income was $62 million compared to a loss of $28 million in the prior year period. During the quarter, the segment received a number of classified contracts for $284 million.

Missile Systems ( MS ): Revenue increased 1.66% year over year to $1.35 billion. MS recorded $180 million of operating income compared with $155 million in the first quarter of 2011.

During the quarter, the segment booked a $497 million contract for Advanced Medium-Range Air-to-Air Missiles (AMRAAM) and a $172 million contract for AIM-9X Sidewinder short range air-to-air missiles, both for the U.S. Navy and international customers.  The company also received a $171 million contract for the development of Standard Missile-3 ("SM-3") for the Missile Defense Agency ("MDA") and $79 million for the development of the Accelerated Improved Intercept Initiative ("AI3") program for the U.S. Army.

Network Centric Systems ( NCS ): Revenue decreased 10.8% year over year to $1 billion in the quarter, largely due to lower sales in U.S. Army programs. The segment operating income was $116 million, down 27.5% year-over-year. During the quarter, NCS received an $81.0 million contract on the Navy Multiband Terminal ("NMT") program for the U.S. Navy.

Space and Airborne Systems ( SAS ): Revenue in the quarter decreased marginally by 0.6% year over year to $1.26 billion. SAS recorded $173 million of operating income, up from $156 million in the previous year period.

Technical Services ( TS ): Revenue was approximately flat year over year at $802 million. The segment generated operating income of $71 million compared with $81 million in first quarter of 2011.

Financial Update

Raytheon ended the reported period with cash and cash equivalents of $3.54 billion versus $2.66 billion at the end of first quarter of 2011. Long-term debt increased to $4.61 billion compared to $3.61 billion in the year-ago period.

Operating cash flow generated from continuing operations during the reported quarter was $111 million compared with $60 million in the prior year period.

As a part of its previously announced share repurchase program, the company repurchased 7.9 million shares of common stock for $400 million. Also, during the quarter, the company increased its annual dividend rate by 16% to $2 per share.

Peer Comparison

Yesterday, one of its peers, Northrop Grumman Corporation ( NOC ) reported impressive first quarter 2012 results. Earnings of $1.88 per share compared favorably with $1.44 per share posted in the first quarter of 2011. Northrop results also exceeded the Zacks Consensus Estimate of $1.59 for the quarter. Sales for the reported quarter decreased 7.9% to $6.19 billion from $6.73 billion in the year-ago quarter, and were 1.0% lower than the Zacks Consensus Estimate of $6.26 billion.


The company maintained its sales guidance in the range of $24.5 billion to $25 billion for 2012. However, it raised its EPS guidance to $5.55-$5.70 for 2012 versus its previous expectation of $5.45 to $5.60.


We believe that Raytheon is one of the best-positioned companies among the large-cap defense players due to its strong order bookings and order backlog of $34.3 billion at the end of the first quarter of 2012. Going forward, we expect revenue and earnings growth to be driven by a strong presence in the areas of Intelligence, Surveillance and Reconnaissance ( ISR ); air & missile defense systems; border security; air traffic management; training and homeland security; and cyber security.

This is, however, offset by apprehensions over future growth of the U.S. defense budget, the fate of high-cost programs, risks related to key project executions and order cancelations.

The company presently retains a short-term Zacks #4 Rank (Sell). We have a long-term Neutral recommendation on the stock.

Based in Waltham, Massachusetts, Raytheon Company is a leader in technology and innovation specializing in defense, homeland security and other government markets throughout the world. It provides state-of-the-art electronics, mission systems integration and other capabilities in the areas of sensing; effects and command, control, communications and intelligence systems, as well as a broad range of mission support services.

NORTHROP GRUMMN (NOC): Free Stock Analysis Report
RAYTHEON CO (RTN): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
More Headlines for: ISR , MS , NCS , SAS , TS

More from Zacks.com




Equity Research
Follow on:

Find a Credit Card

Select a credit card product by:
Select an offer:
Data Provided by BankRate.com