Raytheon posts sharp drop in profit; lifts 2015 revenue forecast

WASHINGTON (Reuters) - Raytheon Co RTN.N, maker of the Patriot missile system, on Thursday reported sharply lower net earnings and bookings in the third quarter, but said revenues for the full year would be higher than expected, with further growth seen in 2016.

A man walks past the Raytheon exhibition during the Australian International Airshow in Melbourne March 2, 2011. REUTERS/Mick Tsikas

The company’s upbeat outlook drove shares over 4 percent higher to $117.49 on the New York Stock Exchange.

Chief Financial Officer Toby O’Brien said the drop in quarterly earnings was due to the mix of products, internal investments in new technologies, and costs related to the company’s $1.9 billion Websense acquisition in May.

Quarterly earnings still exceeded Raytheon’s expectations, he said, and business segment operating margins remained strong despite a drop to 12.3 percent, excluding adjustments for the Websense acquisition, from 13.5 percent a year earlier.

Bookings, which fell 9.6 percent in the quarter, were seen reaching $25.5 billion in 2015, plus or minus $500 million, topping the company’s previous outlook by about $1 billion.

Revenues were now seen in a range of $23 billion to $23.3 billion in 2015, up from an earlier range of $22.7 billion to $23.2 billion. The company lefts its full-year forecast for earnings per share unchanged at $6.47 to $6.62.

O’Brien said sales should grow 3 percent to 4 percent in 2016, driven by new development awards, while segment margins were likely to be “flat to up.”

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O’Brien said international sales accounted for a record 32 percent of total quarterly sales, with the full year percentage expected to be around 30 percent.

He said Poland remained in talks with the U.S. government about a $5 billion Patriot missile system order, despite reports that the expected winner of Poland’s Oct. 25 parliamentary election could rethink that arms sale and others. A formal letter of request for the Raytheon system was expected next year, with a contract award likely in 2017, he said.

Another big deal expected this year, a multi-billion dollar order by Qatar for the Terminal High Altitude Area Defense system was likely to slip until 2016, or perhaps 2017, he said. Lockheed builds THAAD, while Raytheon supplies its main radar.

But a separate $1 billion Qatari order for an early warning radar system should be finalized in 2016, officials said.

Raytheon reported quarterly net earnings of $448 million from continuing operations, a drop of 13 percent from $515 million a year earlier, while earnings per share fell nearly 11 percent to $1.47 from $1.65 a year earlier.

Revenues rose 5.6 percent to $5.78 billion from $5.47 billion, buoyed by Patriot and TOW anti-tank missile sales.

Analysts polled by Thomson Reuters I/B/E/S had forecast earnings of $435 million or $1.43 per share and revenues of $5.76 billion.

O’Brien said Raytheon repurchased $250 million in shares in the quarter, and was on track to complete $1 billion in buybacks by year-end.

Additional reporting by Idrees Ali; Editing by Nick Zieminski and Alan Crosby