Raytheon Co. jumped the most in more than six years after raising its annual sales forecast, signaling a possible end to a revenue slump that began in 2010 at the maker of Patriot missile defense systems.
“We’re looking to grow this year, which is a little bit earlier, maybe a year earlier, than our previous expectation,” Chief Financial Officer Toby O’Brien said Thursday in a telephone interview.
Revenue will be $22.7 billion to $23.2 billion, up from a previous range of $22.3 billion to $22.8 billion, Raytheon said. The company reduced its annual profit projection by 20 cents to $6.47 to $6.62 a share due to costs from a $1.9 billion deal to create a cybersecurity company.
Raytheon has been grappling with shrinking U.S. Defense Department budgets, and hadn’t posted an annual sales gain since 2010. The latest revenue forecast compares with a $22.7 billion estimate among analysts surveyed by Bloomberg. Last year’s total was $22.8 billion, so Raytheon’s outlook raises the prospect of a 2015 increase instead of analysts’ projection for a 2016 gain.
The stock surged 5.7 percent to $102.50 at 9:45 a.m. in New York, the biggest intraday advance since April 2009. The shares fell 10 percent this year through Wednesday, trailing the 2.7 percent increase in the Standard & Poor’s 500 Index.
Raytheon’s quarter included an agreement in April to combine its cyber unit with Vista Equity Partners LLC’s Websense Inc. to expand commercial sales. Raytheon contributed $1.57 billion in net cash for an 80 percent stake in the new firm.
Quarterly earnings from continuing operations were $1.65 a share, the Waltham, Massachusetts-based company said in a statement. The total included a 9-cent unfavorable impact from the Websense deal. Analysts projected profit of $1.63 a share, according to an average of 18 estimates compiled by Bloomberg.
Net sales rose 3 percent to $5.8 billion, above analysts’ average estimate of $5.5 billion. The total was boosted by a 10 percent gain in the Integrated Defense Systems unit. Net revenue in the newly created Raytheon Websense venture was $57 million.
Raytheon announced a $2 billion Patriot order in April with the Kingdom of Saudi Arabia. The deal brought sales for the missile defense system to more than $5 billion since December.
The company could win another $3 billion in Patriot orders next year, according to Seth Seifman, a JPMorgan Chase & Co. analyst who rates Raytheon neutral.
Patriot orders have supported Raytheon’s expansion in overseas markets. Domestic sales fell last year to 71 percent of Raytheon’s total, the lowest share of revenue since at least 2000, according to data compiled by Bloomberg. At the end of the second quarter, 44 percent of the backlog was in international sales, O’Brien said.
“That’s a new high for the company, so the pipeline there continues to be very strong for us,” the CFO said. “Clearly our focus in that area continues to pay off.”
Raytheon now expects to buy back $1 billion of shares this year, up from a previous estimate of $750 million. The company may also use cash for “niche acquisitions,” O’Brien said.
“We’ll continue to look, whether it be on the commercial side or the defense side, for acquisitions that are going to add value,” O’Brien said.