Raytheon boosts 2012 profit forecast citing push to cut costs

RAYTHEON CO. boosted its 2012 profit forecast on cost cuts even as its third quarter profits rose less than 1 percent.
Posted 10/25/12

(Updated, 10:15 a.m.)

WASHINGTON - Raytheon Co., one of the world’s largest missile makers, boosted its full-year profit forecast and said third-quarter profit rose less than 1 percent.

Profit from continuing operations for the year will be $5.36 to $5.46 a share, up from an estimate of $5.15 to $5.30 a share made in July, the Waltham, Massachusetts-based company said today in a statement. Analysts surveyed by Bloomberg projected a profit of $5.32 a share.

Raytheon’s performance rests on its “continued focus on reducing cost and increasing productivity,” Chairman and Chief Executive Officer Bill Swanson said in the statement.

Income from continuing operations rose in the quarter to $501 million, or $1.51 a share, from $498 million, or $1.42 a share, a year earlier, Raytheon said. It exceeded the $1.27-a- share average estimate of 22 analysts surveyed by Bloomberg. Sales declined 1.2 percent to $6.05 billion.

Raytheon rose 1.5 percent to $55.97 in New York trading at 9:41 a.m. after gaining 14 percent this year.

Raytheon’s third-quarter adjusted operating margin of 13 percent has increased 0.8 percent this year compared with last year, Dave Wajsgras, the company’s chief financial officer, said in an interview.

Such margin increases should continue, “given the strong cost reduction efforts under way and the high percentage of fixed price contracts” at Raytheon that account for 56 percent of sales, Doug Harned, an analyst at Sanford C. Bernstein in New York, wrote in a note to clients today. He has an “outperform” rating on Raytheon.

Jobs cut

Raytheon has let go about 3,000 employees workers this year, half of them tied to work it lost on the Polar program for the National Science Foundation, Wajsgras said. In December, Lockheed won a $2 billion order to take over management of the foundation’s research stations in the Antarctic.

Raytheon continues to hire new employees “particularly in the cyber area, which is growing substantially” as well as for air and missile defense systems and in classified programs, Wajsgras said. Jon Kasle, a Raytheon spokesman, said he couldn’t immediately say whether the company has had a net gain or loss of jobs this year.

Bookings for classified U.S. government work accounted for about $1 billion during the third quarter, Wajsgras said. Bookings for such programs “are up close to 50 percent year-to- date,” he said.

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