(Reuters) - U.S. weapons maker Raytheon Co (RTN.N) on Thursday reported a better-than-expected second-quarter profit and raised its full-year profit and sales outlook, helped by higher sales of missiles and guns for naval ships, sending its stock up 3% premarket.
Massachusetts-based Raytheon and other U.S. weapons makers are expected to benefit from the recently passed $733-billion defense bill for fiscal year 2020, representing an about 2% higher spending over the previous year.
Geopolitical tensions surrounding the safe shipping of oil tankers through the Strait of Hormuz and North Korea test-firing ballistic missiles again could also aid weapons sales for U.S. contractors this year.
“We have seen increased demand (for weapons) because of the threat really in all regions of the world,” Raytheon Chief Financial Officer Toby O’Brien told Reuters.
“Nations want to protect their sovereignty. That’s a consistency that we are seeing globally across the board.”
Sales in Raytheon’s missile systems unit, which makes radar threat countering high-speed anti-radiation missiles and rapid-fire, radar-guided guns for ships, rose 8% to $2.21 billion in the quarter ended June 30.
Margins in the business increased to 11.4% from 11.3%.
Last month, Raytheon agreed to merge with United Technologies Corp (UTX.N) aerospace business to create a new company worth about $121 billion.
The deal has faced opposition from United Tech shareholder and billionaire investor Daniel Loeb who has said his hedge fund Third Point will vote against the merger.
But, Raytheon said the merger was progressing well and would close in the first half of 2020.
“We remain confident that we will get the respective shareholder votes on both sides in order to get the deal closed,” O’Brien said.
Revenue in Raytheon’s space and airborne systems business, its second biggest, jumped 13.2% to $1.82 billion, helped by higher sales of its products including missile warning satellites and tactical radars to international customers.
Margins in the unit fell to 12.6% from 12.8%.
The company now expects its 2019 net sales between $28.8 billion and $29.3 billion, up from a range of $28.6 billion to $29.1 billion, previously.
The company also raised its full-year forecast for earnings per share from continuing operations to a range of $11.50 to $11.70, from $11.40 to $11.60.
Raytheon’s income from continuing operations rose to $817 million, or $2.92 per share in the quarter, from $799 million, or $2.78 per share, a year earlier.
Revenue in the quarter rose 8.1% to $7.16 billion.
Analysts on average had expected quarterly earnings of $2.64 per share on a revenue of $7.04 billion, according to IBES data from Refinitiv.
Reporting by Dominic Roshan K.L. and Ankit Ajmera in Bengaluru; Editing by Shailesh Kuber