* Big focus on cost-cutting, foreign sales
* CEO says company nearing 30 pct goal for international
* More big foreign orders seen in second half of year
By Andrea Shalal-Esa
July 25 U.S. weapons maker Raytheon Co
on Thursday reported higher-than-expected earnings and revenue
for the second quarter and joined other major defense companies
in raising its forecast for the full year despite Pentagon
The company, which makes Patriot missiles and an array of
other military equipment, experienced some delays in U.S.
bookings as a result of Pentagon budget cuts imposed in March,
but is "staying ahead of the curve" with continued cost-cutting
and strong foreign sales, Chief Financial Officer David Wajsgras
Raytheon Chief Executive William Swanson told analysts that
international sales rose 10 percent in the quarter, making them
a key driver of the positive second-quarter results, and would
fuel growth in coming years.
He said Raytheon was nearing its goal of having foreign
sales account for 30 percent of total revenue and could set even
higher targets. "As we get to that milestone (of 30 percent)
we'll be thinking about 35, because you have to think in
increments to go do it," he said.
Raytheon said it expected significant foreign business in
the second half of the year, including Patriot missile orders
from Kuwait and Turkey, and a deal with Qatar worth more than $1
billion. Several large U.S. deals were likely as well, the
The company this month beat out Northrop Grumman Corp
to win a huge contract for a next-generation electronic
jamming system for use on the U.S. Navy's EA-18G Growler
aircraft, a deal worth billion of dollars in coming years.
Swanson said the award solidified the company's position as
"a premier electronic warfare provider" and he was confident
Raytheon would hold onto the deal despite a protest filed by
competitor BAE Systems. The U.S. Navy has ordered
Raytheon to stop work on the project.
Swanson said uncertainties about future U.S. budgets
persisted but that Raytheon would continue to cut costs and
leverage its investments in technology to maintain growth.
Wajsgras said strong international sales and continued
cost-cutting should allow Raytheon to maintain its strong
operating margin, now at 12.5 percent, into 2014.
Wajsgras said Raytheon still expects the additional budget
cuts in fiscal 2013 imposed under "sequestration" to trim $500
million from bookings for the full year and about $400 million
from revenue in the second half.
The company is pressing ahead to improve its operations and
trim overhead by consolidating floor space, he said. A recent
consolidation is ahead of schedule and will yield savings well
in excess of the initial target of $85 million, he said.
Defense analyst Byron Callan at Capital Alpha Securities
said aggressive cost-cutting by Raytheon and other arms makers
had kept them ahead of the wave of budget cuts for now but that
2014 and 2015 might be another story.
"June quarter results are looking in the rear-view
mirror. There are still an awful lot of unknowns beyond the
control of contractors that will play out in the coming 12 to 24
months," he said.
Raytheon's results were largely in line with those reported
earlier this week by Lockheed Martin Corp, Northrop
Grumman Corp and other big weapons makers.
Investors drove defense shares up on the positive news this
week, with Northrop and Lockheed hitting all-time highs.
Raytheon shares reached a 52-week high of $70.70 on Thursday,
but fell back to around $69.37, just below Wednesday's close.
Raytheon said it now expects earnings per share of $5.51 to
$5.61 from continuing operations this year, up from an earlier
forecast of $5.26 to $5.41.
It raised its full-year revenue forecast to a range of $23.5
billion to $23.7 billion, lifting the lower end of its previous
range from $23.2 billion.
Second-quarter earnings rose to $1.50 per share from $1.41 a
year earlier, while net income attributable to the company
increased to $488 million from $471 million.
Revenue, which fell in the first quarter, climbed 2.1
percent to $6.12 billion. The company's backlog fell to $32.4
billion from $33.9 billion a year earlier.
Analysts, on average, expected earnings of $1.30 per share
on revenue of $5.8 billion, according to Thomson Reuters
Raytheon said the increase in earnings per share was mainly
due to operational improvements and stock buybacks that reduced
the number of its shares outstanding.
The company's integrated defense and missile systems
businesses reported higher revenue and earnings in the latest
quarter, but sales and profits fell at both the intelligence,
information and services sector, and the space and airborne