Bloomberg News

Raytheon’s Second-Quarter Profit Rises as Sales Fall 7%

July 24, 2014

Raytheon Co. (RTN:US), the world’s largest missile maker, said second-quarter sales fell 6.8 percent as all four of its divisions reported declines.

Net income from continuing operations rose 2.3 percent to $499 million, or $1.59 a share, in the quarter, from $488 million, or $1.50, a year earlier, the company said in a statement today. That matched the average estimate (RTN:US) of 20 analysts surveyed by Bloomberg.

Sales dropped to $5.7 billion in the quarter. While that exceeded the average estimate of $5.57 billion of 18 analysts surveyed by Bloomberg, Raytheon had the biggest decrease among the five largest U.S. government contractors. Boeing Co. (BA:US) was the only one to report a gain, as commercial jet revenue helped buffer flagging defense sales.

Raytheon fell 1.9 percent to close at $93.55 in New York. The shares have risen (RTN:US) 34 percent in trading in the past 12 months, while the Standard & Poor’s 500 Index (SPX) has increased 18 percent during that time.

The contractor’s integrated defense unit, which includes the Patriot missile system, lagged behind other segments. It had a 10 percent drop in revenue as production ended on some overseas programs, and a 33 percent decline in operating income. The other divisions (RTN:US) are missile systems; intelligence, information and services; and space and airborne systems.

Overseas Sales

The Waltham, Massachusetts-based company reaffirmed its January profit forecast of $6.74 to $6.89 a share on sales of $22.5 billion to $23 billion.

Raytheon, the fourth-biggest federal contractor, said its backlog rose to $33 billion in the quarter from $32.4 billion a year earlier.

The company is looking for growth overseas. International customers accounted for 29 percent of sales in the second quarter, Chief Executive Officer Thomas Kennedy told investors on a conference call today. That compared with 27 percent a year earlier.

About 30 percent of its $11.1 billion in bookings during the first six months of the year came from overseas customers, Chief Financial Officer Dave Wajsgras said in a phone interview. That compared with 26 percent during the same period a year earlier, he said.

“We do see some positive momentum,” he said.

Wajsgras told investors the company expected to finish the year with international bookings reaching as much as 40 percent.

Pentagon spending is slowing as the U.S. withdraws combat troops from Afghanistan and the military absorbs automatic federal budget cuts in a process called sequestration. Some of the reductions were alleviated when President Barack Obama in January signed a $1.1 trillion spending bill to fund the government through Sept. 30.

Raytheon is the last of the top five contractors to report results this week. No. 1 Lockheed Martin Corp. (LMT:US), No. 2 Boeing, No. 3 General Dynamics Corp. (GD:US) and the fifth-biggest, Northrop Grumman Corp. (NOC:US), reported earnings that beat analysts’ estimates.

To contact the reporter on this story: Jonathan D. Salant in Washington at jsalant@bloomberg.net

To contact the editors responsible for this story: Stephanie Stoughton at sstoughton@bloomberg.net Larry Liebert


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Companies Mentioned

  • RTN
    (Raytheon Co)
    • $102.65 USD
    • -0.40
    • -0.39%
  • BA
    (Boeing Co/The)
    • $125.06 USD
    • 0.81
    • 0.65%
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