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Raytheon (RTN) Q3 Earnings Top, Improve Y/Y, EPS View Up

Zacks Equity Research

Raytheon Company RTN reported third-quarter 2019 earnings per share (EPS) of $3.08 from continuing operations, which surpassed the Zacks Consensus Estimate of $2.85 by 8.1%. The bottom line improved a solid 36.9% from $2.25 registered in the year-ago quarter.

The year-over-year improvement was driven by operational improvements and the absence of unfavorable pension plan annuity transaction that impacted the third quarter of 2018 by 80 cents per share.

Operational Performance

Raytheon's third-quarter sales of $7,446 million increased 9.4% year over year from $6,806 million. The top line also exceeded the Zacks Consensus Estimate of $7,260 million by 2.6%.

The company’s bookings totaled $9,439 million compared with $8,710 million in the year-ago quarter, reflecting an improvement of 8.4%. Total backlog, at the end of third-quarter 2019, was $44.61 billion, up 3.5% from the previous quarter’s figure.

Total operating expenses increased 11% to $6,240 million. The company’s operating income of $1,206 million rose 1.9% 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 increased 18% year over year to $1,755 million driven by higher net sales from an international air and missile defense system program.

Meanwhile, operating income rose 17% year over year to $282 million, driven by higher volumes.

Intelligence, Information and Services: Sales at this segment totaled $1,855 million, up 6% from $1,742 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 improved 8% to $161 million from $149 million a year ago, driven by higher volume and a gain on an investment.

Missile Systems: Sales at this segment grew 4% to $2,165 million from $2,082 million in the year ago quarter, led by increase in net sales from classified programs.

Moreover, operating income dropped 15% to $219 million due to lower net program efficiencies.

Space and Airborne Systems: At this segment, sales grossed $1,939 million, up 14% from the year-ago quarter. This upside was driven by higher net sales on classified programs, the Next Generation Overhead Persistent Infrared (Next Gen OPIR) program and protected communication systems programs.

Also, operating income rose 22% to $272 million on increased volume and a favorable change in mix.

Forcepoint: This commercial cyber-security segment generated net revenues of $167 million in the third quarter, down 3% from $173 million a year ago.

Moreover, the joint-venture entity generated operating income of $14 million compared with $18 million in the prior-year quarter.

Financial Update

Raytheon ended the third quarter with cash and cash equivalents of $2,646 million, down from $3,608 million as of Dec 31, 2018. Long-term debt totaled $4,258 million compared with $4,755 million as of Dec 31, 2018.

Operating cash flow from operating activities amounted to $1,690 million at the end of third-quarter 2019 compared with $995 million at the end of third-quarter 2018.

The company paid out dividends worth $773 million in the first nine months of 2019 compared with $728 million in the year-ago period.

2019 Guidance  

Raytheon partially raised its financial guidance for 2019. The company currently expects earnings per share from continuing operations in the range of $11.70-$11.80 compared with $11.50-$11.70 projected earlier.

Currently, the Zacks Consensus Estimate for full-year earnings is pegged at $11.73, lower than the midpoint of the company’s projected guided range.

Also, the company now expects to generate revenues in the range of $29.1-$29.4 billion compared with $28.8-$29.3 billion anticipated earlier.

The Zacks Consensus Estimate for full-year revenues stands at $29.08 billion, which lies below the mid-point of the company’s projected view.

Raytheon however maintained its 2019 operating cash flow from continuing operations forecast in the band of $4-$4.2 billion.

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

Hexcel Corporation HXL reported third-quarter 2019 earnings of 90 cents per share, which surpassed the Zacks Consensus Estimate of 89 cents by 1.1%. The bottom line also improved 12.5% from the prior-year quarter’s 80 cents.

Lockheed Martin Corp. LMT reported third-quarter 2019 earnings of $5.66 per share, which surpassed the Zacks Consensus Estimate of $5.03 by 12.5%. The bottom line also improved 10.1% from $5.14 registered in the year-ago quarter.

Textron Inc. TXT reported third-quarter 2019 earnings from continuing operations of 95 cents per share, which surpassed the Zacks Consensus Estimate of 85 cents by 11.8%. The bottom line increased 55.7% from the year-ago quarter.

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