Raytheon Company ( RTN ) reported first
quarter 2013 adjusted earnings of $1.56 per share, beating the
Zacks Consensus Estimate of $1.28. Earnings were also higher than
the year-ago figure of $1.48 per share. The upside was driven
by strong program execution.FLIR SYSTEMS (FLIR): Free Stock Analysis ReportLOCKHEED MARTIN (LMT): Free Stock Analysis
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Reported quarter revenue was $5.9 billion, down approximately 1%
year over year. The top-line surpassed the Zacks Consensus Estimate
by $175 million. Total backlog at the end of the reported period
was $33.5 billion, down 2.2% year over year.
Research and development expenses were down 4.76% year over year
to $160 million. Total operating expenses were $5.2 billion, down
1.1% year over year. Operating income during the quarter was $706
million, flat year over year.
Integrated Defense Systems (IDS): Segment revenue
increased 3.5% year over year to $1.26 billion driven by higher
sales on a missile defense radar program for an international
customer. During the quarter, the segment received a contract worth
$208 million to provide advanced Patriot air and missile defense
capability. It also received a contract worth $160 million to
provide Patriot engineering services support.
Intelligence and Information Systems (IIS):
Segment revenue was down 2.7% year over year to $743 million.
During the quarter, the segment booked $266 million on a number of
Missile Systems (MS): Segment revenue increased
7.5% year over year to $1.5 billion. The increase was driven by
higher sales on the Standard Missile-3 and Rolling Airframe Missile
("RAM") programs. In first quarter of 2013, the segment booked $156
million for the production of RAM and $85 million on Miniature
Network Centric Systems (NCS): Segment revenue
decreased 6.9% year over year to $931 million. The decline reflects
lower sales on sensor production programs. During the reported
quarter, the segment received a $126 million contract on the Wide
Area Augmentation System program.
Space and Airborne Systems (SAS): Revenue in the
quarter declined 4.1% year over year to $1.2 billion. During the
quarter, the segment booked a contract worth $90 million for the
production of Active Electronically Scanned Array radars. The
segment also booked $184 million on a number of classified
Technical Services (TS): Revenue fell 5.9% year
over year to $755 million. The decline reflects lower net sales on
a National Science Foundation Polar contract that was completed in
the first quarter of 2012. During the quarter, the segment booked
$135 million on foreign training programs and $64 million on
domestic training programs in support of Warfighter FOCUS
Raytheon ended the reported period with cash and cash equivalents
of $3.1 billion versus $3.5 billion as of Apr 1, 2012. Long-term
debt was $4.7 billion versus $4.6 billion at the end of Apr 1,
The company generated operating cash flow from continuing
operations of $422 million billion, significantly up from $111
million in the year-ago quarter. The increase reflects working
capital improvements and the timing of tax payments.
As a part of its previously announced share repurchase program,
the company repurchased 4.2 million shares for $225 million. Also,
during the quarter, Raytheon increased its quarterly dividend by
10%, bringing the annualized dividend to $2.20 per share from the
previous payout of $2.00 per share. Following the hike, the company
will now pay a quarterly dividend of 55 cents as against the 50
cents paid earlier.
In Mar 2013, Raytheon Company announced that it has decided to
reorganize its business through segment realignment, announcement
of key executive roles and job cuts. The restructuring would aim to
streamline operations, increase productivity and achieve stronger
alignment with customers' preferences. The restructuring will be
effective from Apr 1, 2013.
Currently, Raytheon's operations are classified into six business
segments: Integrated Defense Systems, Intelligence and Information
Systems, Missile Systems, Network Centric Systems, Space and
Airborne Systems, and Technical Services. However, post
re-alignment, this number will come down to four.
Intelligence and Information Systems and Raytheon Technical
Services businesses will combine to form a new segment called
Intelligence, Information and Services. Parts of the Network
Centric Systems business will be added to Integrated Defense
Systems, Missile Systems, Space and Airborne Systems and the newly
formed Intelligence, Information and Services. Therefore, effective
Apr 1, 2013, the company began operating through four business
segments, namely, Intelligence, Information and Services,
Integrated Defense Systems, Missile Systems, and Space and Airborne
Systems. It will begin reporting its second quarter 2013 results on
the basis of this new structure.
Raytheon lowered its 2013 sales guidance to the range of $23.2
billion to $23.7 billion versus its prior expectation in the range
of $23.6 billion to $24.1 billion. The company raised its adjusted
earnings per share guidance to a range of $5.75 to $5.90 from $5.65
to $5.80 earlier.
The company expects operating cash flow from continuing operations
in the range of $2.1 billion to $2.3 billion for full-year
At the Peers
Recently, Northrop Grumman Corp. ( NOC ) reported first
quarter 2013 results. Adjusted earnings per share of $1.94 easily
surpassed the Zacks Consensus Estimate of $1.73 and the year-ago
figure of $1.88. Previously, the world's largest stand-alone
defense contractor, Lockheed Martin Corporation (
LMT ) posted first
quarter 2013 adjusted earnings of $2.48 per share, comfortably
surpassing the Zacks Consensus Estimate of $2.01 by 23.4%.
Raytheon's top and bottom line results succeeded in surpassing the
Zacks Consensus Estimate. Going forward, with its newly realigned
segments, effective cash deployment strategy and growing cash flow
and operational improvements, we expect the company to continue to
However, we remain concerned about apprehensions over the future
growth of the U.S. defense budget, 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
In the near term, we would advise investors to accumulate its
short-term Zacks Rank #1 (Strong Buy) peer FLIR Systems,
Inc. ( FLIR ).