Raytheon (RTN) Beats On Q4 Earnings, Issues '18 Outlook

Raytheon Company (NYSE:RTN) reported fourth-quarter 2017 adjusted earnings from continuing operations of $2.03 per share, beating the Zacks Consensus Estimate of $2.02 by 0.5%.

The company’s reported earnings of $1.35 per share came in below the prior-year quarter’s equivalent of $1.88, owing to the Tax Cuts and Job Acts of 2017, which had an unfavorable impact of 59 cents on earnings. Also, pre-tax discretionary pension plan contribution had an unfavorable tax-related impact of 9 cents on earnings.

Operational Performance

The company’s fourth-quarter revenues of $6,783 million witnessed 8% year-over-year growth. The reported number however missed the Zacks Consensus Estimate of $6,833.7 million by 0.7%.

Raytheon’s bookings in the fourth quarter were $8,541 million compared with $7,582 million in the year-ago quarter, reflecting a rise of 12.6%. Total backlog at the end of 2017 was $38.2 billion, compared to $36.7 billion at the end of 2016.

Total operating expenses increased 9.5% to $5,913 million in the fourth quarter. Operating income of $870 million dropped 1.1% from $880 million a year ago.

Segmental Performance

Integrated Defense Systems: The segment’s revenues grew 6% year over year to $1,553 million due to higher sales on an international early-warning radar program. Operating income increased to $247 million from $238 million.

Intelligence, Information and Services: The segment’s revenues of $1,572 million were higher than the year-ago level of $1,516 million by 4%. Operating income in the reported quarter dropped to $117 million from $120 million a year ago.

Missile Systems: Segment revenues grew 15% to $2,185 million from $1,897 million a year ago, driven by higher net sales on the Advanced Medium-Range Air-to-Air Missiles, Standard Missile-3 and Paveway programs. Operating income improved to $278 million from $261 million a year ago.

Space and Airborne Systems: Revenues in the quarter improved 4% to $1,670 million. Operating income rose 10% to $242 million.

Forcepoint: This commercial cyber-security segment generated net sales of $156 million in the fourth quarter, up from $143 million a year ago. The joint-venture entity registered operating loss of $8 million in the reported quarter, compared to the year-ago operating income figure of $21 million.

Financial Update

Raytheon ended 2017 with cash and cash equivalents of $3,103 million, down from $3,303 million as of Dec 31, 2016. Long-term debt was $4,750 million, down from an outstanding debt of $5,335 million as of Dec 31, 2016.

Operating cash flow from continuing operations was $2.7 billion at the end of 2017 compared with $2,852 billion at the end of 2016.

In 2017, Raytheon repurchased 4.9 million shares of common stock for $800 million.

Guidance

Raytheon expects to generate net sales in the range of $26.4-$26.9 billion in 2018 and earnings per share in the range of $9.55-$9.75. The company also issued its cash flow from operating activities guidance in the range of $3.6-$4 billion during 2018.

Zacks Rank

Raytheon currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Recent Peer Release

General Dynamics Corporation (NYSE:GD) reported fourth-quarter 2017 earnings from continuing operations of $2.50 per share, beating the Zacks Consensus Estimate of $2.37 by 5.5%. However, its total revenues of $8,277 million missed the Zacks Consensus Estimate of $8,437 million by 1.9%.

Upcoming Peer Release

Huntington Ingalls Industries, Inc. (NYSE:HII) is expected to report fourth-quarter 2017 results on Feb 15. The company has an Earnings ESP of +3.43% and a Zacks Rank #2 (Buy).

Lockheed Martin Corp. (NYSE:LMT) is expected to report fourth-quarter 2017 results on Jan 29. The company has an Earnings ESP of +0.31% and a Zacks Rank #2.

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