It has been about a month since the last earnings report for Raytheon (RTN). Shares have lost about 16.6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Raytheon due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Raytheon's Q4 Earnings Surpass Estimates, Sales Up Y/Y
Raytheon reported fourth-quarter 2019 earnings per share (EPS) of $3.16 from continuing operations, outpacing the Zacks Consensus Estimate of $3.11 by 1.6%. The bottom-line figure also improved 7.8% from the year-ago quarter’s $2.93 owing to operational improvements.
For 2019, Raytheon’s earnings came in at $11.92 per share, which surpassed the Zacks Consensus Estimate of $11.88 by 0.33%. The 2019 bottom-line figure also improved 17.4% from the prior-year number.
Operational Performance
Raytheon's fourth-quarter sales of $7,842 million grew 6.5% on a year-over-year basis. The top line, however, fell short of the Zacks Consensus Estimate of $8,028 million by 2.3%.
For 2019, Raytheon generated sales of $29.18 billion, which marginally missed the Zacks Consensus Estimate of $29.35 billion by 0.58%. However, on a year-over-year basis, full-year sales improved 7.8%.
The company’s bookings totaled $12,058 million compared with $8,447 million in the year-ago quarter, reflecting a surge of 42.7%. Total backlog at the end of 2019 was $48.75 billion, up 14.9% from the previous year’s figure.
Total operating expenses increased 6.8% to $6,563 million. The company’s operating income of $1,279 million rose 5.4% year over year.Segmental Performance
Integrated Defense Systems: Sales at this segment grew 18% year over year to $1,981 million, driven by higher net sales from an international air and missile defense system program and an international missile defense radar program. Meanwhile, operating income in the reported quarter also grew 24% to $307 million from $247 million a year ago.
Intelligence, Information and Services: Sales at this segment totaled $1,742 million, higher than the year- ago level of $1,711 million by 2%. Operating income in the reported quarter also improved 3% to $149 million
from $144 million a year ago.
Missile Systems: Revenues at this segment grew 1% to $2,345 million from $2,317 million a year ago, owing to higher net sales on classified programs in 2019. Moreover, operating income improved 9% to $297 million from $273 million in the year-ago quarter.
Space and Airborne Systems: At this segment, revenues grossed $2,018 million that witnessed 7% growth from the year-ago quarter. This upside was driven by increased net sales from classified programs, Next Generation Overhead Persistent Infrared (Next Gen OPIR) program and tactical communication system programs. Also, operating income rose 6% to $278 million on higher volumes.
Forcepoint: This commercial cybersecurity segment generated net revenues of $177 million in the fourth quarter, up 2.9% from $172 million a year ago.
Moreover, operating income in the reported quarter surged 200% to $6 million from $2 million a year ago.
Financial Update
Raytheon ended 2019 with cash and cash equivalents of $4,292 million, up from $3,608 million as of Dec 31, 2018.
Long-term debt summed $3,261 million, as of Dec 31, 2019, down from $4,755 million, as of Dec 31, 2018.
Net cash inflow from operating activities amounted to $4,480 million in 2019 compared with $3,428 million in 2018.
How Have Estimates Been Moving Since Then?
Estimates revision followed a downward path over the past two months. The consensus estimate has shifted -10.13% due to these changes.
VGM Scores
Currently, Raytheon has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Raytheon has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
Raytheon Company (NYSE:RTN
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