Aerospace and defense firm Raytheon Company RTN will release third-quarter 2015 financial results before the market opens on Oct 22, 2015. In the prior quarter, Raytheon reported a positive earnings surprise of 1.23%. Let’s see how things are shaping up at the company prior to this announcement.
Factors to Consider
Like other defense majors, Raytheon is highly dependent on the U.S. government for military contracts and any change in the federal government’s budgetary policy could adversely impact the company. However, its missiles and ship defense systems will continue to register strong demand.
The Websense acquisition, completed in the second quarter, is expected to dilute earnings by 25 cents in 2015. Nevertheless, the strong cash flow generation capability will help Raytheon to fund its share buyback program and boost shareholder value.
Earnings Whispers?
Our proven model does not conclusively show that Raytheon is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here.
Zacks ESP: Raytheon has an Earnings ESP of 0.00%. This is because the Most Accurate estimate and the Zacks Consensus Estimate both stand at $1.40.
Zacks Rank: Raytheon carries a Zacks Rank #4. The Zacks Rank #4 combined with a 0.00% makes an earnings beat unlikely this season.
As it is, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks that Warrant a Look
Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:
Northrop Grumman Corp. NOC has an Earnings ESP of +4.07% and a Zacks Rank #2.
General Dynamics Corp. GD has an Earnings ESP of +4.76% and a Zacks Rank #3.
Aerojet Rocketdyne Holdings, Inc. AJRD has an Earnings ESP of +21.74% and a Zacks Rank #3.
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