Smart-bomb sales drive Raytheon's revenue rise

(Reuters) - Raytheon Co RTN.N, the maker of Patriot missile systems, reported a 4.3 percent rise in quarterly revenue on Thursday, helped by higher sales of its Paveway laser- and GPS-guided smart bombs and air-to-air missiles.

One of Raytheon's Integrated Defense buildings is seen in San Diego, California January 20, 2011. REUTERS/Mike Blake

Despite the strong results, shares of the Waltham, Massachusetts-based company fell more than 3 percent in early trading on a broad sell-off in defense stocks caused by some companies in the sector missing revenue targets.

Raytheon raised its 2016 forecast for earnings from continuing operations for the third time, citing performance and favorable accounting adjustments.

The company said sales in its missile systems unit, its biggest business by revenue, increased 9.4 percent to $1.80 billion in the third quarter ended Oct. 2.

Sales in Raytheon’s space and airborne systems business also jumped 10 percent to $1.59 billion, helped by higher revenue from an international classified program.

Raytheon’s space and airborne systems business makes tracking, targeting and navigation sensors for aircraft, drones and missiles.

On a call with analysts, management said prospects for 2017 were upbeat, citing a potential for sales to grow up to 5 percent.

Raytheon’s Chief Financial Officer Toby O’Brien said the company will continue to invest in itself, but also return cash to shareholders through dividends and share repurchases.

O’Brien, on the analyst call, said Raytheon would “pursue targeted acquisitions.” In an interview with Reuters, he added: “We do not see any major multibillion-dollar acquisitions out in front of us.”

Net income attributable to Raytheon rose 18.3 percent to $529 million, or $1.79 per share, in the quarter from $447 million, or $1.47 per share, a year earlier.

Raytheon said third-quarter earnings included a favorable financial accounting standard and cost accounting standard adjustment of 23 cents.

Total sales rose to $6.03 billion from $5.78 billion.

Raytheon said its bookings increased 30.6 percent to $6.94 billion in the third quarter. Bookings is a forward-looking metric that measures the value of firm orders won by Raytheon.

The company raised and also tightened its expected earnings per share to $7.28-$7.38 for 2016. The previous forecast was $7.13-$7.33.

The company also increased the lower end of its 2016 net sales forecast and said it now expected sales of $24.2 billion to $24.5 billion. The company had earlier pegged the low end of its revenue forecast at $24.0 billion.

Up to Wednesday's close at $141.28, Raytheon's shares were up 13.5 percent this year, compared with a 7.8 percent increase in the Dow Jones U.S. Aerospace & Defense index .DJUSAE.

Reporting by Mike Stone in Washington and Ankit Ajmera in Bengaluru; Editing by Anil D’Silva and Tom Brown