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July 23, 2009
Share ThisBefore markets opened today, Raytheon Company (RTN) announced its second quarter results. The defense electronics giant in contrast to the big daddy of defense contractors, Lockheed Martin Corporation (LMT) reported 25% higher EPS of $1.24 over the year-ago quarter. In contrast, Lockheed Martin on Tuesday reported 13% lower EPS over the year-ago quarter. While Lockheed was swept away by pension blues, Raytheon gained $11 million during the quarter from pension adjustments.
Raytheon exceeded both our and market expectations of $1.13 for the quarter. Operating income fell marginally year-over-year (1.9%) in the Integrated Defense Systems (IDS) and Missile Systems (MS) (7%) segments. This was more than made up by Network Centric Systems (NCS) (12.6%), Space and Airborne Systems (SAS) (24.1%), and Technical Services (TS) (17.8%), along with steady Intelligence and Information Systems (IIS).
On the revenue front, although Raytheon grew 4% during the quarter to $6.1 bilion it failed to cross our expectations and that of the market of $6.2 billion. Topline growth was fueled by all but IIS segment, owing to lower volumes in the e-Borders progam.
Raytheon suffered a $2.4 billion reversal in its backlog in June 2009 on account of the cancellation of the Kinetic Energy Interceptor (KEI) program. Notwithstanding the company booked new orders worth $7.6 billion during the quarter and was able to offset most of the impact. Total backlog stood at $37.3 billion at the end of the quarter. The home-run was hit by the IDS, MS, SAS segments; each garnering more than $1 billion in new orders for the company during the quarter.
Raytheon has increased its full year outlook reflecting solid perofrmance during the quarter. The Company now expects 2009 revenue in the range of $24.5 – $25 billion, compared to the previous guidance of $24.4 – $24.9 billion. EPS for the year is forecasted between $4.60 and $4.75. We maintain our BUY rating on RTN.
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