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By Jonathan D. Salant
By Jonathan D. Salant
WASHINGTON – Raytheon Co., the world’s largest missile maker, said third-quarter profit fell 2.8 percent in a time of Pentagon spending cuts, while the company raised its full-year forecast for earnings and sales.
The U.S. government’s No. 4 contractor Thursday reported net income of $487 million, or $1.51 a share, in the quarter, compared with $501 million, also $1.51 a share, during the same period a year earlier. The earnings beat the $1.33-a-share average estimate of 16 analysts surveyed by Bloomberg.
The company raised its full-year profit outlook to $5.67 to $5.77 a share, up from $5.51 to $5.61 projected in July. It said the latest forecast incorporated the effects of automatic federal budget cuts called sequestration and of the 16-day partial government shutdown this month.
Raytheon said it bought back 2.9 million shares in the quarter and 10.5 million shares so far this year.
Third-quarter sales declined 3.4 percent to $5.84 billion, the Waltham, Mass.-based company said in a statement. Raytheon’s backlog was $32.2 billion at the end of the quarter, down from $35 billion in the year-earlier period.
Raytheon was the last of the top five federal contractors to report third-quarter earnings this week. Some of the biggest U.S. defense contractors, led by Lockheed Martin Corp. and Northrop Grumman Corp., reported little harm to their profits despite sequestration and the shutdown.
The companies had prepared for reduced defense spending with the end of the Iraq war and the continuing withdrawal of U.S. troops from Afghanistan, and they have continued to cut costs.
Lockheed, the No. 1 contractor, said it cut 600 workers last week from its Mission Systems and Training unit. The company raised its full-year forecast as its third-quarter profit rose 16 percent.
Commercial business has helped soften the effects of defense cuts.
Boeing Co., the second-biggest contractor, beat analysts’ profit estimates as airlines bought more fuel-efficient commercial planes. General Dynamics Corp., which ranks third among government suppliers, helped offset declines in military revenue by increased sales of its Gulfstream business jets.
No. 6 contractor United Technologies Corp. reduced its full-year sales forecast as it blamed Pentagon spending cuts for the decline.
Raytheon’s sales fell in all four of the company’s segments, with the biggest drop in the Space and Airborne Systems unit. The division’s revenue declined 7 percent to $1.56 billion in the quarter from the year-earlier period, with lower volumes of classified work and in intelligence, surveillance and reconnaissance systems programs.
‘Circle of hell’
The Missile Systems unit’s sales decreased 3 percent to $1.64 billion, mostly driven by lower revenue in U.S. Army sensor programs. Operating income plunged 13 percent, which the company said was “primarily due to a change in contract mix.”
The Defense Department must cut about $50 billion from its planned spending in the year that began Oct. 1 under sequestration. The temporary spending bill enacted to reopen the U.S. government expires in January.
“It’s entirely possible that we find ourselves an extended period of time trapped in Dante’s first circle of hell,” Phebe Novakovic, CEO of Falls Church, Va.-based General Dynamics, said Wednesday.
“So I think all of that suggests that we need prudence and caution as we move into the rest of the year and the beginning of next year until we can get a more stable plan from the government with respect to both the debt ceiling and funding,” she said on a conference call with investors.