* CFO sees strong earnings, cash flow over next three years
* Adjusted EPS of $1.47 beat analyst view of $1.31
* International sales approach 40 pct of backlog
By Andrea Shalal-Esa
WASHINGTON, Jan 24 U.S. arms maker Raytheon Co
on Thursday forecast a drop of up to 9 percent in
adjusted earnings per share this year as it reported
fourth-quarter earnings per share fell 7 percent on nearly
Additional U.S. budget cuts could have a big impact on the
U.S. military and the defense industry next year, but Raytheon
said its international sales and focus on high-priority areas
should help mitigate the effect.
Raytheon, which makes Patriot missiles and an array of other
defense equipment, said adjusted earnings per share were $1.60
in the fourth quarter, down from $1.72 in the same quarter a
year ago, but above the company's guidance in October.
It said operational improvements in 2011 were more heavily
weighted toward the fourth quarter, making it difficult to
compare the 2012 quarter.
Excluding one-time items such as early debt retirement and
accounting adjustments, the company earned $1.47 per share,
beating analysts, who had forecast EPS of $1.31, according to
Thomson Reuters I/B/E/S.
Raytheon forecast adjusted EPS for this year of $5.65 to
$5.80, which would be a decline of 6.6 percent to 9 percent from
2012, when EPS was raised by buybacks of 15.9 million shares for
Raytheon Chief Financial Officer David Wajsgras told Reuters
the company is "very confident" about its ability to generate
strong earnings and cash flow over the next three years, despite
its forecast for lower earnings in 2013.
He cited the company's recorded funded backlog at the end of
2012 and said international orders were approaching 40 percent
of the overall total backlog, which was helping offset somewhat
softer demand from the U.S. government.
An additional big order from Kuwait, which had been expected
at the end of 2012, is now likely to be signed in the first
quarter, he said.
Wajsgras said the company was forecasting lower earnings for
2013 because some new developmental programs in the classified
arena were just kicking in, generating lower margins initially.
At the same time, some higher-margin business, including a large
international missile contract, will be ramping down this year.
"If you stand back and look at the three-year outlook, we
are very confident in our ability to post very strong earnings
and cash flow over that time point," he told Reuters.
Raytheon's revenue was nearly unchanged at $6.4 billion in
the fourth quarter, but fell 1.5 percent to $24.4 billion in the
full year. Sales were expected to range from $23.6 billion to
$24.1 billion this year, Raytheon said.
Chief Executive William Swanson said the company's continued
focus on productivity and program execution helped it achieve
what he described as a solid operating performance in 2012.
The company's overall profit margin, adjusted to exclude
pensions, dropped to 12.8 percent in the fourth quarter from
14.5 percent in the year-earlier period, but it edged slightly
higher to 13.3 percent in the full year.
Raytheon forecast an adjusted operating margin of 12.3
percent to 12.5 percent in 2013, down somewhat from 13.3 percent
in 2012 but still among the highest margins in the industry,
The company had new bookings of $7.9 billion in the fourth
quarter and ended 2012 with a backlog of $36.1 billion, an
increase of 2.5 percent, or $869 million, from the previous
The funded backlog hit a record $24.1 billion, up from
$22.46 billion at the end of 2011, Raytheon said.
Raytheon said all its business units reported higher sales
and operating income for the full year, except the network
centric systems business and technical services, where sales and
earnings were down.