Raytheon Co. (RTN), the world’s largest missile maker, raised its full-year profit forecast after second-quarter net income increased 9.8 percent.
Profit from continuing operations will be $5.15 to $5.30 a share compared with an earlier forecast of $5 to $5.15 a share made in April, the Waltham, Massachusetts-based company said today in a statement.
Net income from continuing operations increased in the quarter to $472 million, or $1.41 a share, compared with $430 million, or $1.20 a share, a year earlier, Raytheon said. Excluding certain items, profit was $1.55 a share, exceeding the $1.22-a-share average estimate of 21 analysts surveyed by Bloomberg. Sales declined 3.4 percent to $5.99 billion.
Raytheon fell 52 cents to $54.56 at the close in New York trading and has gained 13 percent this year.
Chairman and Chief Executive Officer Bill Swanson is counting on the company’s variety of products and services as well as international business to weather U.S. defense spending cuts that may reach $1 trillion over the next decade.
Foreign orders may contribute as much as 30 percent of Raytheon’s bookings this year, up from 25 percent at the end of the first quarter, Chief Financial Officer Dave Wajsgras said today in a phone interview.
The Pentagon plans to cut about $490 billion from planned spending over a decade, and an additional $500 billion in automatic defense cuts known as sequestration will go into effect starting in January unless lawmakers and the White House agree on an alternative deficit-reduction plan.
Unlike other defense contractors such as Lockheed Martin Corp. (LMT) and Northrop Grumman Corp. (NOC) whose executives have said the budget cuts would lead to employees being fired and profit and cash flow being squeezed, Raytheon is flexible enough to operate under such budget cuts, Wajsgras .
“We are not in a panic mode,” Wajsgras said. “We’ve been managing the company from a cost efficiency standpoint for a number of years. I’m quite comfortable with how we’ll perform in the future.”
By later this year or early next year, Raytheon expects orders for missile defense systems, precision missiles, command control and communications systems and air-traffic control radar from countries in the Middle East, Swanson said today on a conference call with analysts. He cited Turkey, Kuwait, Oman, Saudi Arabia and the United Arab Emirates as among the potential customers.
With U.S. forces out of Iraq and planning to pull out of Afghanistan, nations in the region realize they “have to do more, and they’re thinking about it and have to take action seriously” by building up their weapons inventories, Swanson said.
Raytheon’s second-quarter results were aided by higher sales and profit in its space and airborne systems unit. Operating income at four of five units increased during the quarter, according to the company.
Sales at the network-centric systems unit fell 15 percent and profit declined 28 percent because of weak orders from the U.S. Army and a lower volume of orders overall, the company said. Demand for Army sensors and communication equipment “has not been at the same demand level as in the past,” Wajsgras said.
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