By Calvin Biesecker
Raytheon [RTN] yesterday reported strong fourth quarter earnings and sales driven by improvements in all but one of its operating segments and the company recorded a record backlog which positions it well for the near future.
Net income increased 64 percent to $598 million, $1.37 earnings per share (EPS), compared to $365 million (81 cents EPS) a year ago, easily overcoming losses in discontinued operations related to its sale of Flight Options. Results also benefited from a hefty tax refund. Excluding the tax rebate, adjusted earnings from continuing operations were $420 million (92 cents EPS), still up 26 percent and 4 cents EPS above consensus estimates.
Sales increased 8 percent to $6 billion compared to $5.6 billion a year ago. Growth was driven by double-digit sales gains in the Intelligence and Information Systems and Network Centric Systems (NCS) segments, which benefited from work on new programs, including the United Kingdom’s $1.4 billion e-Borders contract, and certain United States Army programs.
Five of Raytheon’s six operating segments posted higher income, led by Integrated Defense Systems, Space and Airborne Systems, which both recorded double-digit gains, and NCS. Raytheon attributed the results to higher volume and improved program performance.
For the year net income rose 101 percent to $2.6 billion ($5.79 EPS), compared to $1.3 billion ($2.85 EPS), aided in part by the tax refund. Sales increased 8 percent to $21.3 billion from $19.7 billion in 2006. Bookings and backlog for the year were $25.5 billion and $36.6 billion respectively, both representing record levels for the company, which bodes well for this year and beyond, William Swanson, Raytheon’s chairman and CEO, said.
Raytheon upped its earnings and sales guidance for 2008, and now expects EPS to be between $3.65 and $3.80, a 20 cent boost on the low end and 15 cents on the high end of the range. The company added $300 million to its sales outlook, which is forecast to be between $22.4 billion and $22.9 billion. Key wins in the fourth quarter, such as e-Borders, $1.3 billion for a combat system for an Australian destroyer program, and others, combined with lower pension expense and the expected extension of the research and development tax credit, are driving the upward revisions.
Raytheon continues to enjoy a bevy of international interest in its Patriot anti-missile and anti-aircraft systems and is forecasting about $200 million in related foreign sales this year. That number could fluctuate depending on the timing of orders. Swanson said international interest in Patriot is being driven by the growing threat of short and medium-range missiles in certain parts of the world combined with improved capabilities of the system.