Oct. 25 (Bloomberg) -- Raytheon Co., the world’s largest missile maker, boosted its full-year profit forecast and said third-quarter profit rose less than 1 percent.
Profit from continuing operations for the year will be $5.36 to $5.46 a share, up from an estimate of $5.15 to $5.30 a share made in July, the Waltham, Massachusetts-based company said today in a statement. Analysts surveyed by Bloomberg projected a profit of $5.32 a share.
Raytheon’s performance rests on its “continued focus on reducing cost and increasing productivity,” Chairman and Chief Executive Officer Bill Swanson said in the statement.
Income from continuing operations rose in the quarter to $501 million, or $1.51 a share, from $498 million, or $1.42 a share, a year earlier, Raytheon said. It exceeded the $1.27-a-share average estimate of 22 analysts surveyed by Bloomberg. Sales declined 1.2 percent to $6.05 billion.
Raytheon rose 1.1 percent to $55.74 at the close in New York trading and has gained 15 percent this year.
Raytheon’s third-quarter adjusted operating margin of 13 percent has increased 0.8 percent this year compared with last year, Dave Wajsgras, the company’s chief financial officer, said in an interview.
Such margin increases should continue, “given the strong cost reduction efforts under way and the high percentage of fixed price contracts” at Raytheon that account for 56 percent of sales, Doug Harned, an analyst at Sanford C. Bernstein in New York, wrote in a note to clients today. He has an “outperform” rating on Raytheon.
Raytheon has had a net reduction of 3,000 employees so far this year due to “changes in the mix of the company’s programs,” company spokesman Jon Kasle said.
About half of the positions eliminated were tied to work the company lost on the Polar program for the National Science Foundation, Wajsgras said. In December, Lockheed won a $2 billion order to take over management of the foundation’s research stations in the Antarctic.
Raytheon continues to hire new employees “particularly in the cyber area, which is growing substantially” as well as for air and missile defense systems and in classified programs, Wajsgras said.
Bookings for classified U.S. government work accounted for about $1 billion during the third quarter, Wajsgras said. Bookings for such programs “are up close to 50 percent year-to-date,” he said.
Raytheon’s results were aided by increased sales and profit in its integrated defense systems unit, which makes Patriot anti-missile systems and early-warning radar, the company said.
Unlike many of his peers in the defense industry, Swanson has steered away from supplying information-technology services to the U.S. government because “during difficult times that’s an area that faces tremendous compression,” as he put it at an investors’ conference in September.
That was demonstrated yesterday, when Lockheed Martin Corp. estimated its revenue will decline next year because of reduced sales in its Information Systems & Global Solutions unit, and Northrop Grumman Corp. reported that revenue from such services fell 9.2 percent in the third quarter.
Lockheed and Northrop released results for the quarter that beat analysts’ estimates and boosted their 2012 profit forecasts. General Dynamics Corp.’s results fell short of estimates on weak military sales, even with a 30 percent increase in sales at the aerospace operation, maker of Gulfstream business jets.
Northrop said yesterday its 2013 sales will decline because of delays in Congress approving the fiscal year 2013 budget, preventing federal agencies from starting new programs.
Swanson has diversified his company’s products and services, both in the U.S. and internationally, to weather U.S. defense spending cuts that may reach $1 trillion over a decade.
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 President Barack Obama agree on an alternative plan to pare the federal deficit.
Operating income at four of Raytheon’s six units increased during the third quarter, according to the company.
The network-centric systems unit had the biggest declines in sales and profit of 13 percent and 19 percent respectively. The decrease stemmed mostly from weak orders by the U.S. Army, the company said.
Buybacks this year reduced Raytheon’s average count of shares outstanding at the end of the quarter by 5 percent to 333 million shares compared with the year-earlier period.
To contact the reporter on this story: Gopal Ratnam in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: John Walcott at email@example.com