Back to top

Image: Bigstock

Will Steady Contract Wins Drive Raytheon (RTN) Q2 Earnings?

Read MoreHide Full Article

Raytheon Company  is scheduled to release second-quarter 2018 results on Jul 26, before the opening bell.

The company's revenues are anticipated to be driven by a solid order inflow, especially in Missile Systems business unit, in the quarter under review. Last reported quarter, the company delivered a positive earnings surprise of 4.76%.

Let's take a closer look at the factors influencing Raytheon's quarterly results.

Missile Systems Unit Driving Growth

Segment-wise, Missile Systems business unit, representing almost 30% of the company's total business sales continues to be one of the major growth drivers. Keeping this trend alive, Raytheon is poised to benefit from this unit in the second quarter as well.

Notably, the segment won a $93.7-million modification contract for Excalibur 155mm projectiles and a $93-million modification deal for the integration of Small Diameter Bomb II (SDB II) in F/A-18E/F aircraft. Such order flows are likely to boost Missile Systems unit's top line in the yet-to-be reported quarter.

The Zacks Consensus Estimate for second-quarter sales is pegged at $2,023 million for the segment, reflecting year-over-year growth of 10.2%.

Raytheon Company Price and EPS Surprise

Raytheon Company Price and EPS Surprise | Raytheon Company Quote

Other Factors at Play

Apart from Missile Systems business unit, Raytheon's other segments also secured notable contracts from Pentagon. Notably, its Integrated Defense Systems (IDS) business unit clinched a modification contract worth $396 million for providing Romania with Phased Array Tracking on Radar to Intercept Option (PATRIOT) Fire Unit. Moreover, Space and Airborne Systems (SAS) business unit won a deal worth $90 million for supplying the AN/ALR-69A Digital Radar Warning Receiver System.

As a result, the Zacks Consensus Estimate for the above two segments also reflected annual sales growth. Buoyed by such solid sales expectations for majority of its segments, the consensus estimate for second-quarter total sales is pegged at $6.50 billion, representing an annual improvement of 3.5%.

Considering the solid contract inflow that the company witnessed in the second quarter, we may expect the upcoming results to reflect a notable operating margin expansion. This in turn, should boost earnings for Raytheon.

Moreover, lower taxes have been benefiting the company’s bottom line, courtesy of the latest Tax reform. This upside might as well be reflected in the soon-to-be reported quarterly results. The Zacks Consensus Estimate for Raytheon's second -quarter earnings of $2.32 per share reflects a year-over-year increase of 17.2%

What Does the Zacks Model Unveil?

Our proven model shows that Raytheon is likely to beat on earnings in the second quarter. This is because a stock needs to have both — a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Raytheon has an Earnings ESP of +0.38% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Other Stocks That Warrant a Look

Here are some other companies worth considering in the Aerospace sector  as our model shows that these too have the right combination of elements to also beat estimates this earnings season:

Curtiss-Wright (CW - Free Report) is expected to report second-quarter 2018 results on Jul 25. The company has an Earnings ESP of +0.15% and a Zacks Rank of 2.

Embraer (ERJ - Free Report) is expected to report second-quarter 2018 results on Jul 27. The company has an Earnings ESP of +24.59% and a Zacks Rank #3.

A Recent Defense Release

Hexcel Corporation (HXL - Free Report) reported second-quarter 2018 adjusted earnings of 75 cents per share, which missed the Zacks Consensus Estimate of 76 cents by 1.3%.

The Hottest Tech Mega-Trend of All

Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Embraer-Empresa Brasileira de Aeronautica (ERJ) - free report >>

Hexcel Corporation (HXL) - free report >>

Curtiss-Wright Corporation (CW) - free report >>

Published in