Raytheon Falls for Fifth Day as Forecast Trails EstimatesRichard Clough
Raytheon Co. fell after the world’s largest missile maker projected 2015 profit that fell short of analysts’ estimates amid margin pressure.
Earnings will be constrained by higher research and development spending and initial production costs for major new programs, including an air- and missile-defense system for Qatar, Chief Financial Officer Dave Wajsgras said.
“In the first phase of ramping up on large programs you typically start off at a lower return profile,” Wajsgras said in an interview. “It’s a bit of a transition year between longer-duration production programs phasing out and important new program wins ramping up.”
Annual earnings will be $6.20 to $6.35 a share, below analysts’ average estimate of $6.89. Operating margin will be 13 percent to 13.2 percent, compared with 13.9 percent at the end of 2014, the Waltham, Massachusetts-based company said in a statement.
Raytheon fell 2.5 percent to $102 at the close in New York, its fifth day of declines.
Thursday’s earnings release capped a week of fourth-quarter reports from the biggest government contractors. Northrop Grumman Corp. stood out from the pack in giving a profit forecast for this year that beat analysts’ estimates. Lockheed Martin Corp. and General Dynamics Corp. both forecast profit growth that fell short of projections while Boeing Co. said sales in its defense unit will fall this year.
Raytheon has been looking to boost overseas sales as flagging U.S. government contracting and the withdrawal of troops from Afghanistan contributed to a 17 percent decline in defense spending from a peak in 2010. The company, which generates more than a quarter of its annual sales outside the U.S., signed a $2.4 billion contract last month with Qatar for its trademark Patriot missile defense system, one of several international military deals inked before the end of the year.
Income from continuing operations rose 23 percent in the fourth quarter to $576 million, Raytheon said. Profit was $1.86 a share, beating the $1.80 average of 18 analysts’ estimates compiled by Bloomberg. Adjusted earnings, which exclude certain pension-related changes, were $1.71 a share.
Net sales for the quarter increased 4.7 percent to $6.14 billion, beating analysts’ average estimate of $6.07 billion. Revenue rose in all units, aided by a 4 percent gain in its integrated defense unit, which includes the Patriot program.
Qatar became Raytheon’s 13th global customer for the Patriot when the parties signed a foreign military sales contract last month. Raytheon will have as many as three Patriot competitions this year, Wajsgras said, and the company expects to announce a deal with an international customer in the first quarter.
The company also agreed to a $205 million transaction during the quarter to provide equipment to the Japan Maritime Self-Defense Force and a $491 million award for missiles for Korea, Oman, Singapore and Thailand.
International business comprised 40 percent of Raytheon’s backlog at the end of the year, up from 37 percent at the end of 2013.
“International bookings are expected to continue to be strong,” Thomas Kennedy, Raytheon’s chief executive officer, said on a conference call with analysts. “Investing in national security remains a top priority given the global threat environment.”