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Raytheon (RTN) Q2 Earnings Top, Sales Improve Y/Y, View Up

Zacks Equity Research

Raytheon Company RTN reported second-quarter 2019 earnings per share (EPS) of $2.92 from continuing operations, which surpassed the Zacks Consensus Estimate of $2.61 by 11.9%. The bottom line also improved a solid 5% from $2.78 registered in the year-ago quarter. The year-over-year improvement was driven by operational improvements and pension-related items.

Operational Performance

Raytheon's second-quarter sales of $7,159 million increased 8.1% year over year and also exceeded the Zacks Consensus Estimate of $7,005 million by 2.2%.

The company’s bookings totaled $9,475 million compared with $8,694 million in the year-ago quarter, reflecting an improvement of 9%. Total backlog, at the end of second-quarter 2019, was $43.1 billion, up 4.9% from the previous quarter’s figure.

Total operating expenses increased 8.3% to $5,983 million. The company’s operating income of $1,176 million rose 6.9% year over year.

Raytheon Company Price, Consensus and EPS Surprise

Raytheon Company Price, Consensus and EPS Surprise

Raytheon Company price-consensus-eps-surprise-chart | Raytheon Company Quote

Segmental Performance

Integrated Defense Systems: Sales at this segment grew 8% year over year to $1,641 million driven by higher net sales on various international Patriot programs.

Meanwhile, operating income inched up 1% to $264 million.

Intelligence, Information and Services: Sales at this segment totaled $1,777 million, up 5% from $1,687 million recorded a year ago. The top-line improvement can be attributed to higher net sales on classified programs in both cyber and space.

Operating income in the reported quarter also improved 26% to $161 million from $128 million a year ago, driven by higher net program efficiencies.

Missile Systems: Sales at this segment grew 8% to $2,210 million from $2,051 million in the year ago quarter, led by increase in net sales from classified programs, the High-speed Anti-radiation Missile program and the Phalanx program.

Moreover, operating income increased 10% to $253 million due to higher volume and a favorable change in program mix.

Space and Airborne Systems: At this segment, sales grossed $1,817 million, which increased 13% from the year-ago quarter number. This upside was driven by higher net sales on classified programs, the Next Generation Overhead Persistent Infrared (Next Gen OPIR) program and an international tactical radar systems program.

Also, operating income rose 11% to $229 million on increased volume.

Forcepoint: This commercial cyber-security segment generated net revenues of $156 million in the second quarter, up 5% from $148 million a year ago.

Moreover, the joint-venture entity incurred an operating loss of $3 million compared with an operating loss of $8 million in the prior-year quarter.

Financial Update

Raytheon ended the second quarter with cash and cash equivalents of $2,173 million, down from $3,608 million as of Dec 31, 2018. Long-term debt summed $4,257 million compared with $4,755 million as of Dec 31, 2018.

Operating cash flow from operating activities amounted to $412 million at the end of second-quarter 2019 compared with that of $1,439 million at the end of second-quarter 2018.

Furthermore, Raytheon repurchased 1.7 million shares of common stock for $300 million in the quarter under review.

The company paid dividends worth $510 million in the first half of 2019 compared with $480 million in the year-ago period.

2019 Guidance  

Raytheon raised its financial guidance for 2019. The company currently expects earnings from continuing operations to come around $11.50-$11.70 per share compared with $11.40-$11.60 projected earlier.

Currently, the Zacks Consensus Estimate for full-year earnings is pegged at $11.62, higher than the mid point of the company’s projected guided range.

Also, the company now expects to generate revenues in the range of $28.8-$29.3 billion compared with $28.6-$29.1 billion anticipated earlier. The Zacks Consensus Estimate for full-year revenues stands at $28.9 billion, which lies below the mid-point of the company’s projected view.

Raytheon also raised its 2019 operating cash flow from continuing operations forecast to the band of $4-$4.2 billion from $3.9-$4.1 billion range.

Zacks Rank

Raytheon currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Recent Defense Releases

Textron Inc. TXT reported second-quarter 2019 earnings from continuing operations of 93 cents per share, which surpassed the Zacks Consensus Estimate of 85 cents by 9.4%. The bottom line also increased 6.9% from 87 cents in the year-ago quarter.

Lockheed Martin Corp. LMT reported second-quarter 2019 earnings of $5 per share, which outpaced the Zacks Consensus Estimate of $4.74 by 5.5%. The bottom line also improved 23.5% from $4.05 in the year-ago quarter.

Northrop Grumman Corporation NOC reported second-quarter 2019 earnings of $5.06 per share, which exceeded the Zacks Consensus Estimate of $4.64 by 9%. The bottom line also increased 12% from $4.50 reported in the year-ago quarter.

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