Raytheon Profit Beats Estimates as Company Raises OutlookNick Taborek
Raytheon Co. reported first-quarter profit that beat analysts’ estimates and raised its 2013 profit outlook while lowering sales expectations.
The world’s biggest missile maker said net income from continuing operations rose 8.9 percent to $490 million, or $1.49 a share, compared with $450 million, or $1.33 a share, a year earlier. Analysts predicted $1.28 a share, the average of 18 estimates compiled by Bloomberg. Sales fell 1 percent to $5.88 billion, the Waltham, Massachusetts-based company said today in a statement.
Raytheon said it expects full-year profit to be higher than forecast in January. The company said 2013 profit will be $5.26 to $5.41 a share, up from the $5.16 to $5.31 a share forecast last quarter. It expects revenue to be $23.2 billion to $23.7 billion, down from the earlier forecast of $23.6 billion to $24.1 billion, reflecting U.S. automatic budget cuts.
“Strong program execution drove solid operating results in the first quarter,” William Swanson, Raytheon’s chairman and chief executive officer, said in the statement. “Our innovation and technology, along with our focus on productivity, agility and affordability, continue to create value for our customers and shareholders.”
Raytheon rose 2 percent to close at $59.30 in New York, the highest price since May 2010.
The company’s funded backlog declined 1.9 percent to $22.5 billion in the quarter from a year earlier. Raytheon isn’t reducing its backlog projection due to sequestration, Chief Financial Officer Dave Wajsgras said today on a conference call with analysts.
Raytheon’s bookings fell 30 percent to $3.6 billion in the quarter from $5.2 billion a year earlier, according to the statement. Bookings are orders that aren’t yet recorded as sales.
The contractor expects the pace of bookings to increase in the second half of the year, Wajsgras said.
The first-quarter reduction in orders “isn’t any cause for alarm immediately, especially given uncertainty surrounding the defense budget early in the year,” according to George Ferguson, a defense and aerospace analyst at Bloomberg Industries.
“Raytheon can improve bookings as they go through the year, especially with the desirability of their products internationally driven by a strong franchise in missile defense,” Ferguson said in a phone interview.
Raytheon followed defense contracting peers such as General Dynamics Corp., Northrop Grumman Corp. and Lockheed Martin Corp., which also said this week that the budget cuts that took effect March 1 won’t hurt profits this year.
While Raytheon is the only company in the group that cut its revenue forecast, Lockheed said that it expects revenue for the year to fall close to the low end of the range that it forecast in January.
The across-the-board reductions, known as sequestration, were crafted by President Barack Obama and congressional Republicans as a penalty for failing to agree on a deficit reduction strategy. They will strip $1.2 trillion from national security and domestic programs over nine years unless a compromise is reached.
Sequestration will reduce sales by about $400 million during 2013, Wajsgras said today in a telephone interview.
Even so, the company expects higher profit for the year after its strong performance in the recent quarter. “We performed very well in the first quarter operationally,” he said.
Like other top defense contractors, Raytheon is cutting costs. Last year, the company reduced its workforce by about 3,000 employees, or 4.2 percent, Wajsgras said. It plans to finish consolidating its business units by the end of the second quarter, resulting “in some additional headcount reductions,” he said.
“We will continue to manage the employee base depending on business conditions,” Wajsgras said.
International sales, which accounted for 26 percent of revenue last year, are growing in the “mid-single-digit range,” Wajsgras said.