Bloomberg News

Raytheon Profit Falls 3% on Lower Sales; 2011 Outlook Raised

November 01, 2011

(Updates with closing share prices in fifth paragraph.)

Oct. 27 (Bloomberg) -- Raytheon Co., the world’s largest missile maker, said third-quarter profit declined 3 percent after sales and profit at its Integrated Defense and Network systems units fell. It raised its full-year earnings forecast.

Income excluding some items fell to $489 million from $504 million a year earlier, the Waltham, Massachusetts-based company said. Earnings per share increased to $1.39 a share from $1.35 in the previous year. The average estimate of 20 analysts surveyed by Bloomberg was for profit of $1.33 a share. Sales fell 2.2 percent to $6.13 billion.

Full-year adjusted profit will be between $5.55 and $5.65 a share compared with the earlier forecast of $5.50-$5.65, the company said. Sales outlook for the year was cut to the range of $25 billion to $25.3 billion, from $25.5 billion to $25.9 billion. Analysts surveyed by Bloomberg expect profit of $5.01 a share on sales of $25.8 billion.

Chief Executive Officer Bill Swanson has stepped up acquisitions and targeted international sales to boost revenue as U.S. defense spending is projected to decline in the next decade. He has also improved operating margins at the company’s units to boost profitability.

Raytheon rose $1.35, or 3.2 percent, to $43.79 today in New York. The stock has declined 5.5 percent this year compared with the Standard & Poor’s Supercomposite Aerospace & Defense Index, which has gained 1.8 percent in the same period.

Operating Margin

Raytheon’s operating margin of 13 percent is “the highest in a decade,” Dave Wajsgras, Raytheon’s chief financial officer, said in a telephone interview. “That is important, given the customers’ focus on cost reduction.” Savings generated from cost-cutting are passed back to the Pentagon and other customers, he said.

Raytheon also said bookings in the quarter were up 14 percent, to $6.9 billion, from $6.04 billion a year earlier. As a result this year “for the first time we had backlog shifting upward” to almost $35 billion, Wajsgras said.

Revenue at the company’s Network Centric Systems division, which makes radar, fell 10 percent to $1.1 billion, and profit declined 4 percent because of weaker sales to the U.S. Army, the company said.

Weaker Patriot Sales

Sales at the Integrated Defense Systems unit, which makes electronic systems for the U.S. Navy’s DDG-1000 destroyer among others, fell 10.8 percent to $1.18 billion and unit profit fell less than 1 percent to $204 million because of lower Patriot air and missile defense system sales to international customers, the company said.

Orders for Patriot anti-missile systems to Taiwan valued at as much as $600 million may be concluded by the end of this year, Swanson said on a conference call today.

Revenue at the Missile Systems unit, the company’s largest by sales, increased 1.6 percent to $1.41 billion, and unit profit rose 10.6 percent to $178 million on U.S. and international sales of Advanced Medium Range Air-to-Air Missiles, or AMRAAM, and Paveway missiles. The unit also won orders for Standard Missile-3 from the Missile Defense Agency, the company said.

Space and Airborne Systems unit revenue increased 5.4 percent to $1.31 billion, driven by intelligence, surveillance and reconnaissance systems and the acquisition of Raytheon Applied Signal Technology during the quarter, the company said. Unit profit fell 9 percent to $171 million primarily because of acquisition costs, the company said.

Intelligence and Information Systems unit sales rose 3.4 percent to $760 million, and profit remained unchanged at $58 million. Revenue at the Technical Services unit fell 6.4 percent, and profit declined 2.6 percent, because of weaker sales to the Pentagon’s Defense Threat Reduction Agency and the Department of Homeland Security’s Transportation Security Administration, the company said.

--Editors: Steven Komarow, Terry Atlas

To contact the reporter on this story: Gopal Ratnam in Washington at

To contact the editor responsible for this story: Mark Silva at

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