A month has gone by since the last earnings report for Raytheon . Shares have added about 1.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Raytheon due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Raytheon Q1 Earnings Top Estimates on Higher Y/Y Sales
Raytheon reported first-quarter 2019 earnings per share (EPS) of $2.77 from continuing operations, which surpassed the Zacks Consensus Estimate of $2.45 by 13.1%. The bottom line also improved a solid 25.9% from $2.20 registered in the year-ago quarter.The year-over-year improvement was driven by operational improvements and pension-related items.
Operational Performance
Raytheon's first-quarter sales of $6,729 million increased 7.4% year over year and also exceeded the Zacks Consensus Estimate of $6,581 million by 2.2%.
The company’s bookings totaled $5,368 million compared with $6,311 million in the year-ago quarter, reflecting a decline of 14.9%. Total backlog, at the end of first-quarter 2019, was $41.1 billion, up 8% from the previous year’s figure.
Total operating expenses increased 7.5% to $5,616 million. The company’s operating income of $1,113 million rose 6.9% year over year.
Segmental Performance
Integrated Defense Systems: Sales at this segment grew 4% year over year to $1,550 million driven by higher net sales on various Patriot programs and a naval radar program. Meanwhile, operating income dropped 5% to $258 million on account of change in mix and other performance.
Intelligence, Information and Services: Sales at this segment totaled $1,777 million, up 12% from $1,582 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 60% to $187 million from $117 million a year ago.
Missile Systems: Sales at this segment grew 9% to $2,006 million from $1,848 million a year ago increase in net sales across numerous programs. However, operating income dropped to $190 million from $212 million a year ago due to lower net program efficiencies and a change in program mix.
Space and Airborne Systems: At this segment, sales grossed $1,653 million, which increased 5% from the year-ago quarter number. This upside was driven by higher net sales on classified programs. Also, operating income rose 10% to $212 million on increased volume.
Forcepoint: This commercial cyber-security segment generated net revenues of $158 million in the first quarter, up 12% from $158 million a year ago.
Moreover, the joint-venture entity incurred an operating loss of $2 million compared to an operating loss of $7 million in the prior-year quarter.
Financial Update
Raytheon ended the first quarter with cash and cash equivalents of $2,093 million, up from $3,608 million as of Dec 31, 2018. Long-term debt summed $4,256 million, compared to $4,755 million as of Dec 31, 2018.
Operating cash outflow from operating activities amounted to $411 million at the end of first- quarter 2019 against cash inflow of $283 million at the end of first-quarter 2018.
Furthermore, Raytheon repurchased 2.8 million shares of common stock for $500 million in the quarter under review.
The company also increased the annual dividend rate by 8.6% from $3.47 to $3.77 per share, the fifteenth consecutive annual dividend increase.
2019 Guidance
Raytheon has reiterated its financial guidance for 2019. The company continues to expect earnings from continuing operations to come around $11.40-$11.60 per share. Currently, the Zacks Consensus Estimate for full-year earnings is pegged at $11.59, near the higher end of the company’s provided guidance.
Also, the company still expects revenues to be in the $28.6-$29.1 billion range. The Zacks Consensus Estimate for full-year revenues, pegged at $28.8 billion, lies near the mid-point of the company’s projected view.
Raytheon also continues to forecast its 2019 operating cash flow from continuing operations in the $3.9-$4.1 billion band.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -6% due to these changes.
VGM Scores
Currently, Raytheon has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Raytheon has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Raytheon (RTN) Up 1.5% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Raytheon . Shares have added about 1.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Raytheon due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Raytheon Q1 Earnings Top Estimates on Higher Y/Y Sales
Raytheon reported first-quarter 2019 earnings per share (EPS) of $2.77 from continuing operations, which surpassed the Zacks Consensus Estimate of $2.45 by 13.1%. The bottom line also improved a solid 25.9% from $2.20 registered in the year-ago quarter.The year-over-year improvement was driven by operational improvements and pension-related items.
Operational Performance
Raytheon's first-quarter sales of $6,729 million increased 7.4% year over year and also exceeded the Zacks Consensus Estimate of $6,581 million by 2.2%.
The company’s bookings totaled $5,368 million compared with $6,311 million in the year-ago quarter, reflecting a decline of 14.9%. Total backlog, at the end of first-quarter 2019, was $41.1 billion, up 8% from the previous year’s figure.
Total operating expenses increased 7.5% to $5,616 million. The company’s operating income of $1,113 million rose 6.9% year over year.
Segmental Performance
Integrated Defense Systems: Sales at this segment grew 4% year over year to $1,550 million driven by higher net sales on various Patriot programs and a naval radar program. Meanwhile, operating income dropped 5% to $258 million on account of change in mix and other performance.
Intelligence, Information and Services: Sales at this segment totaled $1,777 million, up 12% from $1,582 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 60% to $187 million from $117 million a year ago.
Missile Systems: Sales at this segment grew 9% to $2,006 million from $1,848 million a year ago increase in net sales across numerous programs. However, operating income dropped to $190 million from $212 million a year ago due to lower net program efficiencies and a change in program mix.
Space and Airborne Systems: At this segment, sales grossed $1,653 million, which increased 5% from the year-ago quarter number. This upside was driven by higher net sales on classified programs. Also, operating income rose 10% to $212 million on increased volume.
Forcepoint: This commercial cyber-security segment generated net revenues of $158 million in the first quarter, up 12% from $158 million a year ago.
Moreover, the joint-venture entity incurred an operating loss of $2 million compared to an operating loss of $7 million in the prior-year quarter.
Financial Update
Raytheon ended the first quarter with cash and cash equivalents of $2,093 million, up from $3,608 million as of Dec 31, 2018. Long-term debt summed $4,256 million, compared to $4,755 million as of Dec 31, 2018.
Operating cash outflow from operating activities amounted to $411 million at the end of first- quarter 2019 against cash inflow of $283 million at the end of first-quarter 2018.
Furthermore, Raytheon repurchased 2.8 million shares of common stock for $500 million in the quarter under review.
The company also increased the annual dividend rate by 8.6% from $3.47 to $3.77 per share, the fifteenth consecutive annual dividend increase.
2019 Guidance
Raytheon has reiterated its financial guidance for 2019. The company continues to expect earnings from continuing operations to come around $11.40-$11.60 per share. Currently, the Zacks Consensus Estimate for full-year earnings is pegged at $11.59, near the higher end of the company’s provided guidance.
Also, the company still expects revenues to be in the $28.6-$29.1 billion range. The Zacks Consensus Estimate for full-year revenues, pegged at $28.8 billion, lies near the mid-point of the company’s projected view.
Raytheon also continues to forecast its 2019 operating cash flow from continuing operations in the $3.9-$4.1 billion band.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -6% due to these changes.
VGM Scores
Currently, Raytheon has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Raytheon has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.