Tomahawk missile maker Raytheon sales rises, boosts profit forecast

(Reuters) - Raytheon Co RTN.N reported a 4.2 percent rise in quarterly sales as heightened U.S. and allied military operations and global uncertainty increased demand for laser-guided bombs and missiles, compelling the Tomahawk missile maker to raise its annual sales and profit forecasts for the second time this year.

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

Chief Financial Officer Toby O’Brien told Reuters on Thursday that “all the key metrics - bookings, sales earnings per share, operating cash flow - were better than what we had expected.”

Still, the company predicted full-year bookings just short of last year’s record after a big one-time contract last year.

Raytheon's shares were down 0.38 percent at $168.24 on the New York Stock Exchange in late morning trading. Raytheon's shares have so far risen 19.4 percent this year, slightly better than the 18.5 percent increase in the Dow Jones U.S. Aerospace and Defense index .DJUSAE.

The Waltham, Massachusetts-based weapons maker raised its 2017 sales forecast by about $200 million to between $25.1 billion and $25.6 billion, and its expectation for earnings from continuing operations by 10 cents to a range of $7.35 to $7.50 per share, O’Brien said.

Raytheon, which also makes the Patriot missile system, said sales in its missile systems unit, its biggest by revenue, surged 11.4 percent to $1.90 billion in the second quarter ended July 2. The gain was helped by higher sales of the Standard Missile-2 (SM-2), Standard Missile-3 (SM-3), and Paveway family of laser and GPS precision-guided bombs.

Raytheon management told analysts on Thursday’s post-earnings conference call that third quarter sales would be in the range of $6.18 billion to $6.33 billion with full-year bookings going as high as $26 to $27 billion for the year.

Raytheon ended 2016 with a record $27.8 billion in bookings, according to the company’s annual report.

Raytheon’s favorable billings during the quarter were “driven by numerous orders across the divisions versus any big mega award, bodes well,” Robert Stallard an analyst at Vertical Research LLC, said in a note on Thursday.

SM-2s are often used to defend ships against missiles and aircraft. They have a range of about 90 nautical miles. SM-3s destroy incoming ballistic missile threats in space using sheer impact that is equivalent to a 10-ton truck traveling at 600 miles per hour.

Revenue in Raytheon’s space and airborne systems business, its second-biggest, rose about 4 percent to $1.61 billion, helped by higher sales from a classified domestic program.

The unit makes electronic warfare systems for tactical aircraft, helicopters and ships, as well as tracking and navigation sensors used on airborne platforms, among other products.

Forcepoint, a commercial cyber-security company within Raytheon, grew to nearly $600 million in business by the end of 2016 and has had sales of $282 million so far in 2017. The division has been the subject of initial public offering rumors in media reports.

Raytheon Chief Executive Tom Kennedy said there are “no plans ... to do an IPO in the near future. And so I’ll take that off the table,” in response to an analyst’s question on Forcepoint during Thursday’s conference call.

Raytheon’s total sales rose to $6.28 billion in the second quarter from $6.03 billion a year earlier.

Net income attributable to Raytheon fell to $553 million, or $1.89 per share, from $717 million or $2.41 per share. Analysts has predicted second quarter earnings per share of $1.76, according to Thomson Reuters I/B/E/S data.

Second quarter earnings per share from continuing operations included a 9-cent charge relating to the early retirement of debt, while year-ago earnings from continuing operations included a tax-free gain of 53 cents.

During the quarter Raytheon purchased 600,000 shares of its common stock for $100 million, bringing the total number of shares repurchased so far in 2017 to 3.3 million for $500 million.

Reporting by Mike Stone in Washington and Ankit Ajmera in Bengaluru; Editing by Bernadette Baum and Jonathan Oatis