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Raytheon (RTN) Up 1.4% Since Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Raytheon Company (RTN - Free Report) . Shares have added about 1.4% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is RTN due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Raytheon Beats on Q1 Earnings, Hikes '18 EPS View

Raytheon Company reported first-quarter 2018 earnings from continuing operations of $2.20 per share, beating the Zacks Consensus Estimate of $2.10 by 4.8%. The reported figure also came in higher than the year-ago quarter’s earnings of $1.73 per share by 27.2%.

The year-over-year upside in earnings was driven by operational improvements and lower taxes.

Operational Performance

The company’s first-quarter revenues of $6,267 million witnessed 4.5% year-over-year growth. The reported number also surpassed the Zacks Consensus Estimate of $6,173.2 million by 1.5%.

Raytheon’s bookings in the first quarter were $6,311 million compared with $5,688 million in the year-ago quarter, reflecting a rise of 11%. Total backlog at the end of first-quarter was $38.1 billion, compared to $38.2 billion at the end of 2017.

Total operating expenses increased 3.4% to $5,226 million in the first quarter. Operating income of $1,041 million improved 9.8% from $1,041 million a year ago.

Segmental Performance

Integrated Defense Systems: The segment’s revenues grew 7% year over year to $1,489 million due to higher sales from an international Patriot program awarded in the first quarter 2018. Operating income increased to $273 million from $212 million.

Intelligence, Information and Services: The segment’s revenues of $1,582 million were higher than the year-ago level of $1,507 million by 5%, on account of higher net sales on classified and training programs. Operating income in the reported quarter increased to $117 million from $111 million a year ago.

Missile Systems: Segment revenues grew 5% to $1,848 million from $1,756 million a year ago, driven by higher net sales on classified programs. Operating income declined to $212 million from $216 million a year ago.

Space and Airborne Systems: Revenues in the quarter inched up 1% to $1,568 million. Operating income rose 2% to $193 million.

Forcepoint: This commercial cyber-security segment generated net sales of $141 million in the first quarter, down from $144 million a year ago. The joint-venture entity incurred operating loss of $7 million in the quarter, as against the year-ago operating income figure of $16 million.

Financial Update

Raytheon ended first-quarter with cash and cash equivalents of $2,748 million, down from $3,103 million as of Dec 31, 2017. Long-term debt was $4,751 million, almost in line with $4,750 million as of Dec 31, 2017.

Operating cash inflow from continuing operations was $283 million at the end of first quarter compared with cash outflow of $41 million in the year-ago quarter.

In the quarter under review, Raytheon repurchased 1.9 million shares of common stock for $400 million. Moreover, the company has hiked the annual dividend rate by 8.8% to $3.47 per share, which marked the 14th consecutive annual dividend increase.

Raytheon raised its guidance for 2018. The company currently expects to generate net sales in the range of $26.5-$27.0 billion, compared to earlier band of $26.4 to $26.9 billion, in 2018.

On the bottom-line front, Raytheon now expects to deliver earnings per share in the range of $9.70-$9.90, up from prior range of $9.55-$9.75. The company however reiterated its cash flow from operating activities guidance in the range of $3.6-$4 billion during 2018.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There have been two revisions higher for the current quarter compared to four lower.

VGM Scores

At this time, RTN has a subpar Growth Score of D, however its Momentum is doing a lot better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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.

The company's stock is suitable solely for momentum based on our styles scores.


Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, RTN has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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