* Company eyes orders from Middle East
* Earnings per share of $1.51 beat analysts' forecast of
* Sees strong margins, weaker sales in 2014
By Andrea Shalal-Esa
WASHINGTON, Oct 24 Raytheon Co on
Thursday joined other U.S. arms makers in reporting
higher-than-expected quarterly earnings and raising full-year
forecasts, saying it expected to maintain strong margins and
cash flow in 2014 despite an expected drop in sales.
Raytheon, maker of Patriot missile systems and a wide range
of other military equipments, said it saw "tremendous
opportunities" for landing several big orders later this year.
Chief Financial Officer Dave Wajsgras told Reuters he was
fairly confident about Raytheon's overall business outlook and
that mandatory U.S. military budget cuts required under
sequestration were not hitting the defense industry as quickly
as initially expected.
He said Raytheon's large international business, which
accounts for nearly 40 percent of the company's backlog, was
helping to offset the effects of the U.S. budget cuts, and he
remained hopeful that U.S. lawmakers would resolve the ongoing
fiscal crisis in coming months.
"We exceeded our guidance on sales, earnings and cash flow,
and we've taken the year up accordingly with respect to our
overall financial guidance," Wajsgras said in a telephone
interview. "On a year-to-date basis, we're seeing a lot of
strength versus last year."
Chief Executive Officer William Swanson told a conference
call that Raytheon was planning for a continuation of mandatory,
across-the-board budget cuts required under sequestration next
year, but still expected to generate strong profits and cash
"I would tell you that '14 feels a lot like '13," Swanson
said. "Revenue should be down just slightly, driven by domestic.
I think the margins should continue to be strong, and the
company is expected to have strong cash generation."
Wajsgras said Raytheon hoped to land orders to sell a
Patriot missile defense system to Kuwait and a ground-based air
defense system for Oman as well as a possible Patriot sale to
Qatar and some additional U.S. orders.
JPMorgan analyst Joe Nadol said quarterly results were good,
but the company would have to generate a lot of business in the
fourth quarter to achieve its full-year bookings forecast of
$23.5 billion, plus or minus $500 million.
Raytheon shares were down 1.8 percent at $77.05 in morning
Analysts welcomed Raytheon's results, which were largely in
line with those of other big weapons makers, including Lockheed
Martin Corp and Northrop Grumman Corp.
Rob Stallard of RBC Capital Markets said he was heartened by
the better-than-expected performance of Raytheon's Intelligence,
Information and Services (IIS) business, whose operating margin
was essentially steady at 13.7 percent.
"This was a strong quarter for Raytheon operationally,
especially IIS," he wrote in a note to clients.
Wajsgras said Raytheon was confident that it would prevail
in two separate protest actions filed against recent large
contract awards it won from the U.S. Navy, given what he
described as the company's superior technical solutions.
Swanson said Raytheon was also still ready to sell its
Patriot missile defense system to Turkey if that country changed
its mind about buying a rival system offered by a Chinese
company that is under U.S. sanctions.
Raytheon said third-quarter income from continuing
operations fell 2.8 percent to $487 million from $501 million a
year earlier. Earnings per share were flat at $1.51, while
analysts polled by Thomson Reuters I/B/E/S had forecast $1.33.
Sales dropped 3.4 percent to $5.8 billion.
Raytheon said it expected full-year earnings per share of
$5.67 to $5.77 from continuing operations, 16 cents more than
its previous forecast and up from $5.65 in 2012.
The company increased its 2013 sales forecast by $100
million to a range of $23.6 billion to $23.8 billion. That would
amount to drop of 2.5 percent to just over 3 percent from sales
of $24.4 billion in 2012.