(Reuters) - Raytheon Co on Thursday posted quarterly revenues that narrowly missed Wall Street estimates, but forecast sales would rise as much as 5 percent next year as the weapons maker benefits from higher defense spending by the Trump administration.
Raytheon posted net sales of $6.28 billion, missing Wall Street estimates of $6.33 billion, according to Thomson Reuters I/B/E/S. Sales at its second largest unit, Space and Airborne Systems, which makes sensors and satellite components, were flat from the previous year with profit margins down slightly.
Raytheon (RTN.N) shares slid more than 4 percent to $181.46.
Raytheon reported a 5 percent rise in quarterly profit on Thursday, selling more laser-guided bombs and GPS-guided artillery rounds. The maker of the Patriot missile system is benefiting as U.S. and allied military operations buy more weapons to take on heightened global conflicts and possible threats.
During an earnings conference call with analysts, Raytheon Chief Financial Officer Toby O’Brien forecast 2018 sales would grow to between $26.2 billion and $26.7 billion, a 3 percent to 5 percent lift.
Waltham, Massachusetts-based Raytheon raised the lower end of its 2017 sales forecast by about $200 million to $25.3 billion, and kept the top end unchanged at $25.6 billion.
“This is now 5 to 6 percent sales growth over 2016, and our prior range was 4 to 6 percent,” O’Brien told Reuters.
Raytheon increased its full-year 2017 earnings forecast from continuing operations to $7.45 to $7.55 per share, from $7.35 to $7.50 per share, partly due to lower interest expenses and a reduced tax rate.
The company sees 2017 operating cash flow from continuing operations of $2.8 billion to $3.1 billion.
Raytheon and other U.S. weapons makers are expected to benefit in the coming year from an increase in overall defense spending under President Donald Trump’s administration.
Sales at its missile systems unit, its biggest by revenue, surged 9.9 percent to $1.95 billion in the quarter, helped by higher sales of the Paveway family of laser-guided bombs and the Excalibur GPS-guided precision projectiles, the company said.
Operating margin in the unit rose 1.1 points to 14.4 percent.
Sales at its integrated defense systems business, which makes the Patriot missile system and surveillance and search radars, rose 4.3 percent to $1.39 billion, on higher sales from an international early warning radar program.
The operating margin rose 0.8 points to 16.6 percent.
Raytheon’s overall income from continuing operations rose to $568 million, or $1.97 per share, from $541 million, or $1.84 per share, a year earlier.
Total sales increased 4.5 percent to $6.28 billion.
Raytheon's shares have surged 27.7 percent this year, outperforming a 14.2 percent increase in the benchmark S&P 500 index .SPX.
Reporting by Mike Stone in Washington and Ankit Ajmera in Bengaluru; Editing by Bernadette Baum and Jeffrey Benkoe