Raytheon Company reported second-quarter 2016 adjusted earnings from continuing operations of $1.75 per share, beating the Zacks Consensus Estimate of $1.70 by 2.9%. Earnings also increased 6.1% from the year-ago figure of $1.65.
Operational Performance
The company’s second-quarter revenues of $6,035 million registered 3.2% year-over-year growth. The reported number surpassed the Zacks Consensus Estimate of $5,841.5 million by 3.3%.
The company’s bookings in the second quarter were $7,118 million compared with $7,580 million in the year-ago period, reflecting a decrease of 6.1%. Total backlog at the end of the quarter was $35.31 billion, up from $34.49 billion a year ago, while funded backlog was $26.14 billion, up from $25.33 billion a year ago.
Total operating expenses decreased 2.4% to $5,075 million. As a result, operating income improved 48.1% to $960 million from $648 million a year ago.
Quarterly Segment Performance
Integrated Defense Systems: Segment revenues decreased 11% year over year to $1,399 million. Segment operating income improved to $375 million from $202 million a year ago.
Intelligence, Information and Services: Segment revenues of $1,642 million were higher than the year-ago level of $1,594 million due to higher sales on cybersecurity and special missions programs. Operating income in the reported quarter increased to $124 million from $122 million a year ago.
Missile Systems: Segment revenues grew 6% year over year to $1,656 million due to higher sales of Paveway programs. Operating income jumped 21% to $223 million from $184 million a year ago.
Space and Airborne Systems: Revenues in the quarter grew 9% year over year to $1,547 million due to higher sales on classified programs. Operating income improved 4% to $203 million due to a change in the program mix.
Forcepoint: This commercial cybersecurity company generated net sales of $128 million in the second quarter, up sharply from $57 million a year ago. The joint-venture entity registered an operating income of $7 million in the reported quarter.
Financial Update
Raytheon ended the second quarter with cash and cash equivalents of $2,016 million, down from $2,328 million as of Dec 31, 2015. Long-term debt was $5,333 million, up marginally from an outstanding debt of $5,330 million as of Dec 31, 2015.
Operating cash flow from continuing operations of $1,071 million in the first half of 2016 increased significantly from $431 million a year ago.
In the second quarter, Raytheon repurchased 1.6 million shares of common stock for $202 million.
Guidance
Raytheon maintained its 2016 revenue expectation of $24.0 billion to $24.5 billion. However, it increased its earnings projection to the range of $7.13-$7.33 per share from $6.93−$7.13 per share expected earlier for 2016.
The company expects 2016 operating cash flow from continuing operations to be $2.8−$3.1 billion (versus $2.7−3.0 billion expected earlier).
Peer Releases
Pentagon’s prime contractor, Lockheed Martin Corp. (LMT - Free Report) reported second-quarter 2016 earnings of $3.32 per share, surpassing the Zacks Consensus Estimate of $2.92 by 13.7%. Earnings also increased 12.9% from the year-ago level.
Northrop Grumman (NOC - Free Report) reported second-quarter 2016 adjusted earnings of $2.60 per share, beating the Zacks Consensus Estimate of $2.50 by 4%. Earnings also rose 5.3% from $2.47 earned in the year-ago quarter.
General Dynamics Corporation (GD - Free Report) announced second-quarter 2016 earnings from continuing operations of $2.44 per share, beating the Zacks Consensus Estimate of $2.30 by 6.1%.
Zacks Rank
Raytheon Company currently has a Zacks Rank #3 (Hold).
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Raytheon Company reported second-quarter 2016 adjusted earnings from continuing operations of $1.75 per share, beating the Zacks Consensus Estimate of $1.70 by 2.9%. Earnings also increased 6.1% from the year-ago figure of $1.65.
Operational Performance
The company’s second-quarter revenues of $6,035 million registered 3.2% year-over-year growth. The reported number surpassed the Zacks Consensus Estimate of $5,841.5 million by 3.3%.
The company’s bookings in the second quarter were $7,118 million compared with $7,580 million in the year-ago period, reflecting a decrease of 6.1%. Total backlog at the end of the quarter was $35.31 billion, up from $34.49 billion a year ago, while funded backlog was $26.14 billion, up from $25.33 billion a year ago.
Total operating expenses decreased 2.4% to $5,075 million. As a result, operating income improved 48.1% to $960 million from $648 million a year ago.
Quarterly Segment Performance
Integrated Defense Systems: Segment revenues decreased 11% year over year to $1,399 million. Segment operating income improved to $375 million from $202 million a year ago.
Intelligence, Information and Services: Segment revenues of $1,642 million were higher than the year-ago level of $1,594 million due to higher sales on cybersecurity and special missions programs. Operating income in the reported quarter increased to $124 million from $122 million a year ago.
Missile Systems: Segment revenues grew 6% year over year to $1,656 million due to higher sales of Paveway programs. Operating income jumped 21% to $223 million from $184 million a year ago.
Space and Airborne Systems: Revenues in the quarter grew 9% year over year to $1,547 million due to higher sales on classified programs. Operating income improved 4% to $203 million due to a change in the program mix.
Forcepoint: This commercial cybersecurity company generated net sales of $128 million in the second quarter, up sharply from $57 million a year ago. The joint-venture entity registered an operating income of $7 million in the reported quarter.
Financial Update
Raytheon ended the second quarter with cash and cash equivalents of $2,016 million, down from $2,328 million as of Dec 31, 2015. Long-term debt was $5,333 million, up marginally from an outstanding debt of $5,330 million as of Dec 31, 2015.
Operating cash flow from continuing operations of $1,071 million in the first half of 2016 increased significantly from $431 million a year ago.
In the second quarter, Raytheon repurchased 1.6 million shares of common stock for $202 million.
Guidance
Raytheon maintained its 2016 revenue expectation of $24.0 billion to $24.5 billion. However, it increased its earnings projection to the range of $7.13-$7.33 per share from $6.93−$7.13 per share expected earlier for 2016.
The company expects 2016 operating cash flow from continuing operations to be $2.8−$3.1 billion (versus $2.7−3.0 billion expected earlier).
Peer Releases
Pentagon’s prime contractor, Lockheed Martin Corp. (LMT - Free Report) reported second-quarter 2016 earnings of $3.32 per share, surpassing the Zacks Consensus Estimate of $2.92 by 13.7%. Earnings also increased 12.9% from the year-ago level.
Northrop Grumman (NOC - Free Report) reported second-quarter 2016 adjusted earnings of $2.60 per share, beating the Zacks Consensus Estimate of $2.50 by 4%. Earnings also rose 5.3% from $2.47 earned in the year-ago quarter.
General Dynamics Corporation (GD - Free Report) announced second-quarter 2016 earnings from continuing operations of $2.44 per share, beating the Zacks Consensus Estimate of $2.30 by 6.1%.
Zacks Rank
Raytheon Company currently has a Zacks Rank #3 (Hold).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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