Raytheon on Thursday reported strong third quarter financial results driven by higher sales across its defense segments and improved operating performance and the company increased its outlook for the top and bottom lines this year.
Net income soared 34% to $860 million, $3.08 earnings per share (EPS), from $644 million ($2.25 EPS) a year ago, topping analysts’ expectations by $0.22 per share. Sales increased 9% to a record $7.4 billion from $6.8 billion a year ago.
Sales were higher on international air and missile defense programs, classified cyber and space programs in the Intelligence, Information and Services (IIS) segment, and classified programs in the Missile Systems, and Space and Airborne Systems (SAS) segments, and protected communications systems programs, and the Next Generation Overhead Persistent Infrared program.
The company also recorded impressive bookings of $9.4 billion, helping to generate a record backlog of $44.6 billion, up 5% since the end of 2018.
Classified work made up 21% of the sales and bookings in the quarter and international business accounted for 34% of the orders and 39% of the backlog.
At the operating level, the company’s earnings results were driven primarily by double-digit improvements at Integrated Defense Systems and SAS due to higher sales and program mix, and to a lesser extent at IIS, which benefited from higher sales and a gain on an investment.
Missile Systems was the only segment to report lower operating income, which was due to lower net program efficiencies. Operating income was down 15% in the quarter and down 5% year to date, while operating margin is 10.1% so far this year.
“We’re not happy about where the margins are right now,” Thomas Kennedy, Raytheon’s chairman and CEO, said on the company’s earnings call. Both he and Anthony “Toby” O’Brien, Raytheon’s chief financial officer, are “taking a lot of interest in this area,” Kennedy said.
Raytheon is competing with Lockheed Martin to design the Long-Range Standoff Weapon (LRSO) nuclear-armed, air-launched cruise missile for the Air Force. Each 2017 contract is worth roughly $900 million. The Air Force has said it intends to buy about 1,000 LRSO missiles, which it plans to start deploying in the late 2020s.
