Raytheon Company RTN reported third-quarter 2015 earnings from continuing operations of $1.47 per share, beating the Zacks Consensus Estimate of $1.40 by 5%. However, earnings lagged the year-ago figure of $1.65 by 10.9%.
Earnings from continuing operations included a 9 cent unfavorable impact from the Raytheon|Websense (RW) acquisition.
Operational Performance
The company’s third-quarter revenues of $5,783 million registered 5.6% growth year over year. However, the reported number missed the Zacks Consensus Estimate of $5,801 million by 0.3%.
The company’s bookings in the third quarter were $5,315 million compared with $5,878 million in the year-ago period, reflecting a decline of 9.6%. Total backlog at the end of the quarter stood at $33.5 billion, in line with the 2014-end figure, while funded backlog was $24.36 billion, up from $23.09 billion at 2014 end.
Total operating expenses however climbed 7.9% year over year to $5,086 million. Operating income of $697 million decreased 8.6% year over year from $763 million.
Quarterly Segment Performance
Integrated Defense Systems: Segment revenues increased 7% year over year to $1,533 million due to higher sales from international Patriot programs. Segment operating income declined 8% year over year to $212 million owing to a change in program mix.
Intelligence, Information and Services: Segment revenues of $1,438 million were marginally lower than the year-ago level of $1,450 million. Operating income in the reported quarter dropped 8% to $108 million from $118 million a year ago, primarily due to a change in program mix and acquisition-related costs.
Missile Systems: Segment revenues grew 11% year over year to $1,645 million. Operating income increased 15% to $219 million from $190 million a year ago.
Space and Airborne Systems: Revenues in the quarter declined 4% year over year to $1,446 million. This was due to lower sales volume on international tactical radar systems programs. Operating income declined 14% year over year to $204 million due to higher net program efficiencies in the third quarter 2014.
Raytheon|Websense: The newly formed commercial cybersecurity company generated net sales of $114 million in the third quarter. The joint venture entity registered an operating income of $20 million in the reported quarter compared with $5 million a year ago.
Financial Update
Raytheon ended the third quarter with cash and cash equivalents of $2,453 million, down from $3,222 million as of Dec 31, 2014. Long-term debt was $5,334 million, up marginally from an outstanding debt of $5,330 million as of Dec 31, 2014.
Raytheon’s capital expenditure of $96 million in the reported quarter rose from $72 million a year ago. Operating cash flow from continuing operations of $1,102 million in the quarter increased 160.5% year over year.
In the third quarter, Raytheon repurchased 2.4 million shares of common stock for $250 million.
Guidance
Raytheon lifted its revenue expectation for 2015 to the range of $23.0 billion to $23.3 billion from its earlier projection of $22.7 billion to $23.2 billion. It however maintained its earnings guidance from continuing operations of $6.47−$6.62 per share.
The company reiterated its 2015 operating cash flow from continuing operations in the range of $2.5−$2.7 billion.
At the Peers
Pentagon’s prime contractor, Lockheed Martin Corp. LMT posted third-quarter 2015 earnings of $2.77 per share, comfortably surpassing the Zacks Consensus Estimate of $2.70 by 2.6%.
The Boeing Company BA delivered third-quarter 2015 adjusted earnings of $2.52 per share, confidently beating the Zacks Consensus Estimate of $2.22 by 13.5%.
Upcoming Peer Release
General Dynamics Corp. GD is slated to report third-quarter 2015 results on Oct 28, 2015, before the opening bell. The Zacks Consensus Estimate is $2.10.
Zacks Rank
Raytheon Company currently has a Zacks Rank #4 (Sell).
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