We expect aerospace and defense company
) to beat expectations when it reports second-quarter 2013
results on Jul 25, 2013.
Why a Likely Positive Surprise?
Our proven model shows that Raytheon is likely to beat earnings
because it has the right combination of key factors.
Positive Zacks ESP:
Expected Surprise Prediction or ESP (Read:
Zacks Earnings ESP: A Better Method
), which represents the difference between the Most Accurate
estimate and the Zacks Consensus Estimate, is +1.54%. This is
meaningful and a leading indicator of a likely positive earnings
surprise for this company.
Zacks #3 Rank (Hold):
We note that stocks with Zacks Ranks of #1, 2 and 3 have a
significantly higher chance of beating earnings. The Sell rated
stocks (#4 and 5) should never be considered going into an
The combination of Raytheon's Zacks Rank #3 (Hold) and +1.54% ESP
make us confident of a positive earnings beat on Jul 25.
What is Driving the Better than Expected
We view Raytheon as one of the well-positioned companies among
the large-cap defense players due to its non-platform-centric
focus. This factor shields the company from program specific
risks related to cancellation or deferral of any specific
Raytheon is flooded with a number of contracts from several
national as well as international government establishments. On
Jul 8 2013, the company was awarded a cost-plus-incentive-fee
contract, worth $279.4 million, by the U.S. Department of Defense
(DoD) to develop a new electronic jammer for the U.S. Navy.
Apart from domestic contracts, Raytheon is progressing well on
foreign military sales opportunities, including the Kuwait
Patriot, the Oman ground-based air defense system, radars and
missiles. We believe international sales continue to be a key
source of future revenue generation for the company.
The positive trend is seen in the trailing four quarter average
surprise of 19.90%. The company's first-quarter 2013 surprise was
21.87%. Benefits from an effective cash deployment strategy and
operational improvements aided the surprise.
Other Stocks to Consider
Raytheon is not the only organization looking up this earnings
season. We also see other aerospace and defense players to beat
The Boeing Company
), Earnings ESP of +1.27% and Zacks Rank #2 (Buy).
General Dynamics Corporation
), Earnings ESP of +0.61% and Zacks Rank #3 (Hold).
Northrop Grumman Corporation
), Earnings ESP of + 0.59% and Zacks Rank #3 (Hold).
BOEING CO (BA): Free Stock Analysis Report
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RAYTHEON CO (RTN): Free Stock Analysis Report
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