RHI
| Raytheon Co. |(RTN - NYSE) |$211.07 |
Note: More details to come; changes are highlighted. Except where noted, and highlighted, no other sections of this report have been updated.
Reason for Report: 1Q18 Earnings Flash.
Prev. Ed: 4Q17 Earnings Update done on Mar 28, 2018.
Flash Update [Note: earnings update in progress; final report to follow]
On Apr 26, 2018, Raytheon Company reported first-quarter 2018 earnings from continuing operations of $2.20 per share, beating the Zacks Consensus Estimate of $2.10 by 4.8%. The reported figure also came in higher than the year-ago quarter’s earnings of $1.73 per share by 27.2%.
The year-over-year upside in earnings was driven by operational improvements and lower taxes.
Operational Performance
The company’s first-quarter revenues of $6,267 million witnessed 4.5% year-over-year growth. The reported number also surpassed the Zacks Consensus Estimate of $6,173.2 million by 1.5%.
Raytheon’s bookings in the first quarter were $6,311 million compared with $5,688 million in the year-ago quarter, reflecting a rise of 11%. Total backlog at the end of first-quarter was $38.1 billion, compared to $38.2 billion at the end of 2017.
Total operating expenses increased 3.4% to $5,226 million in the first quarter. Operating income of $1,041 million improved 9.8% from $1,041 million a year ago.
Segmental Performance
Integrated Defense Systems: The segment’s revenues grew 7% year over year to $1,489 million due to higher sales from an international Patriot program awarded in the first quarter 2018. Operating income increased to $273 million from $212 million.
Intelligence, Information and Services: The segment’s revenues of $1,582 million were higher than the year-ago level of $1,507 million by 5%, on account of higher net sales on classified and training programs. Operating income in the reported quarter increased to $117 million from $111 million a year ago.
Missile Systems: Segment revenues grew 5% to $1,848 million from $1,756 million a year ago, driven by higher net sales on classified programs. Operating income declined to $212 million from $216 million a year ago.
Space and Airborne Systems: Revenues in the quarter inched up 1% to $1,568 million. Operating income rose 2% to $193 million.
Forcepoint: This commercial cyber-security segment generated net sales of $141 million in the first quarter, down from $144 million a year ago. The joint-venture entity incurred operating loss of $7 million in the quarter, as against the year-ago operating income figure of $16 million.
Financial Update
Raytheon ended first-quarter with cash and cash equivalents of $2,748 million, down from $3,103 million as of Dec 31, 2017. Long-term debt was $4,751 million, almost in line with $4,750 million as of Dec 31, 2017.
Operating cash inflow from continuing operations was $283 million at the end of first quarter compared with cash outflow of $41 million in the year-ago quarter.
In the quarter under review, Raytheon repurchased 1.9 million shares of common stock for $400 million. Moreover, the company has hiked the annual dividend rate by 8.8% to $3.47 per share, which marked the 14th consecutive annual dividend increase.
Guidance
Raytheon raised its guidance for 2018. The company currently expects to generate net sales in the range of $26.5-$27.0 billion, compared to earlier band of $26.4 to $26.9 billion, in 2018.
On the bottom-line front, Raytheon now expects to deliver earnings per share in the range of $9.70-$9.90, up from prior range of $9.55-$9.75. The company however reiterated its cash flow from operating activities guidance in the range of $3.6-$4 billion during 2018.
MORE DETAILS WILL COME IN THE IMMINENT EDITIONS OF ZACKS RD REPORTS ON RTN
Portfolio Manager Executive Summary [Note: Only highlighted material has been changed.]
Raytheon Company engages in the design, development, manufacture, integration and support of technological products, services and solutions for governmental and commercial customers in the U.S. as well as other countries.
All the 13 firms covering the stock assigned positive ratings. While 12 out of them rendered positive outlook, only one gave a neutral views. Notably, none of the firms had a negative outlook on the stock. Target prices range from $199 (( 7.2% downside from the current price) to $265 (( 23.6% upside from the current price). The Digest average is $231.67 (( $29.81 from the previous report; 8.1% upside from the current price).
Bullish (Positive or Equivalent): (92.31%; 12/13 firms) – The bullish firms are of the opinion that Raytheon is favourably is positioned to benefit from increased spending by the Defence of Department (DoD) in both modernization and readiness accounts owing to its well-balanced product mix. They view the stock’s favourable mix of munitions (missiles) and radars (missile defence) solutions to aid the company to perform well going forward. Additionally, they believe international backlog remains strong, due to large international bookings which continue to exceed international sales.
Cautious (Neutral or Equivalent): (7.69%; 1/13 firms)
ar
Overview [Note: Only highlighted material has been changed.]
Key investment considerations as identified by the analysts are as follows:
|Key Positive Arguments |Key Negative Arguments |
|With a large percentage of the company’s revenues coming from the defense |The company operates in a highly competitive market. Some competitors |
|industry, it will benefit even if new platforms are canceled or deferred, as |may have more extensive or specialized business segments. On the other|
|it usually supplies upgrades to legacy platforms. |hand, some customers might develop their own products and compete |
|Strong international sales are expected to boost top-line growth in the coming|directly with the company for sales. |
|years. |The company’s operations are exposed to risks including delays in |
|Wide range of combat-proven defense products aids in attracting orders from |international weapons systems and potential program cancellations. |
|both Pentagon and foreign allies of the nation. This can be attributed for the|These events can lead to disruptions in technology and raise costs. |
|consistent performance over the years. |Change in the federal government’s budgetary priorities or a shift in |
|A robust balance sheet is expected to support additional share buybacks and |spending, apart from programs that the company supports, could |
|cash deployments. |adversely affect its business. |
|Raytheon|Websense (RW) provides unified web, email, mobile and data security | |
|solutions globally for protecting an organization's data and users from | |
|external and internal threats. | |
Based in Massachusetts, Raytheon Company is one of the largest aerospace and defense companies in the U.S. with a diversified line of military products, including missiles, radars, sensors, surveillance and reconnaissance equipments, communication and information systems, naval systems, air traffic control systems, and technical services.
The company operates through five business segments, namely, Intelligence, Information and Services; Integrated Defense Systems; Missile Systems; Space and Airborne Systems; and Forcepoint (formerly known as Raytheon|Websense). Total backlog at the end of the fourth quarter was $34.7 billion (up $1.1 billion a year-ago).
Intelligence, Information and Services (IIS) offers cyber security services. It also provides a wide array of training, space, logistics and engineering solutions for government and civilian customers. It focuses in ISR.
Integrated Defense Systems (IDS) mainly provides air and missile defense, large land- and sea-based radars and systems for managing command, control, communications, computers, cyber and intelligence (C5I). It also makes air traffic management systems, sonars, torpedoes and electronic systems for ships.
Missile Systems (MS) designs, develops, and produces missile systems for critical requirements, including air-to-air strikes, surface navy air defense, land combat missiles, guided projectiles and directed energy weapons. This segment mainly caters to the U.S. Navy, Army, Air Force and Marine Corps, and the armed forces of more than 40 countries.
Space and Airborne Systems (SAS) manufactures radars and other sensors for aircraft, spacecraft and ships. The unit also offers communications and electronic warfare solutions and performs research in areas ranging from linguistics to quantum computing.
Forcepoint provides unified web, email, mobile and data security solutions globally for protecting an organization's data and users from external and internal threats. Effective Jan 1, 2017, Forcepoint has reorganized into the following principal product lines: Data and Insider Threat Security; Cloud Security; Global Governments; and Network Security. This structure reflects the reorganization of Forcepoint’s broad portfolio of cybersecurity products into focused technology and market categories.
The company’s fiscal year coincides with the calendar year. For more information on the company, please visit .
Nov 20, 2017
Long-Term Growth [Note: Only highlighted material has been changed.]
Growth of the aerospace and defense industry depends largely on the spending outlook of the government departments, with the U.S. defense budget being the primary driver. The U.S. is the world’s largest aerospace and defense market and has the biggest military budget in the world. Raytheon is one of the largest aerospace and defense companies in the U.S. with a diversified line of military products, including missiles, radars, sensors, surveillance and reconnaissance equipment, communication and information systems, naval systems, air traffic control systems, and technical services.
The company is however facing intense competition in light of the ongoing consolidation among the U.S. and global defense operators. Nevertheless, the company strives to remain competitive in the coming years by expanding into new markets and building a global supply chain. The company also competes in the commercial cybersecurity market, which is characterized by rapid changes in technology, products, customer specifications and industry standards. However, demand for its products remains strong, especially in the areas of integrated air and missile defense.
The company has also been identifying additional opportunities to drive cost savings by streamlining product lines and reducing fixed costs. Going forward, the company sees additional product synergies. It considers itself well positioned to address opportunities and challenges in the industry with a diverse portfolio comprising innovative technologies. It remains focused on delivering the best value to its customers and shareholders in the long term.
Demand for Raytheon’s capabilities related to missiles and missile defense is strong and likely to get even stronger over the next few years. The company's missile programs to drive the segmental margins of the company going forward. They believe that the company is poised to benefit from larger defense contracts and programs, driven by higher operating incomes primarily from the Integrated Defense Systems (IDS) and Intelligence and Information Services (IIS) segments. IDS margins can expand driven by favorable mix. Missile Systems should also benefit from higher volumes. Margin also expected to expand due to opportunities in the international market, as international (e.g., Patriot) work mature. This is likely to drive the operating income of the company, in coming quarters.
Raytheon has a distinct focus on its overseas business. Foreign military contracts continue to be vital growth drivers for the company. In particular, rising demand from the Gulf countries as well as the Asia-Pacific region is expected to drive the company’s top-line growth. This mix is likely to support Raytheon's overall industry-leading margin performance, going forward. Apart from that, new opportunities in Asia as well as competitive awards in Europe continue to develop.
Mar 28, 2018
Target Price/Valuation [Note: Only highlighted material has been changed.]
|Rating Distribution |
|Positive |92.31% ( |
|Neutral |7.69% ( |
|Negative |0.0% |
|Avg. Target Price |$231.67 ( |
|Highest Target Price |$265.00 ( |
|Lowest Target Price |$199.00 ( |
|Analysts with Target Price/Total |12/13 |
Risks to the target price include future levels of domestic and international military spending, delays in international awards, cuts in the U.S. defense budget, political risks associated with the funding of specific programs, contract execution risk, changes to export regulations, pension returns/discount rates, the company’s ability to compete and win contracts, management changes, acquisition/integration risks and decisions related to capital structure and use of cash.
Recent Events [Note: Only highlighted material has been changed.]
On Jan 28, 2018, Raytheon signed an agreement worth $4.7 billion with the government of Poland to sell its combat proven Patriot missile from the U.S. Army.
On Jan 25, 2018, Raytheon reported fourth-quarter 2017 adjusted earnings from continuing operations of $2.03 per share, beating the Zacks Consensus Estimate of $2.02 by 0.5%.
The company’s reported earnings of $1.35 per share came in below the prior-year quarter’s equivalent of $1.88, owing to the Tax Cuts and Job Acts of 2017, which had an unfavorable impact of 59 cents on earnings. Also, pre-tax discretionary pension plan contribution had an unfavorable tax-related impact of 9 cents on earnings.
On Jan 21, 2018, The Board of Directors of Raytheon Company has voted to increase the company's annual dividend payout rate by 8.8 percent, from $3.19 to $3.47 per share. The Board also authorized payment of a quarterly cash dividend of $0.8675 per outstanding share of common stock, to be paid on May 10, 2018, to shareholders of record as of the close of business on April 11, 2018.
Revenue [Note: Only highlighted material has been changed.]
Provided below is a summary of revenues for the quarter as compiled by Zacks Digest:
|Revenue ($ M) |4Q16A |
|Copy Editor | |
|Content Ed. |Aparajita Dutta |
|Lead Analyst |Aparajita Dutta |
|QCA |Jewel Saha |
|No. of brokers reported/Total brokers | |
|Reason for Update |1Q18 Earnings Flash |
[pic][pic][pic]
-----------------------
Apr 26 2018
................
................
In order to avoid copyright disputes, this page is only a partial summary.
To fulfill the demand for quickly locating and searching documents.
It is intelligent file search solution for home and business.