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Analyzing Raytheon’s Strong Performance in 4Q14

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Mar. 16 2015, Published 1:59 p.m. ET

Raytheon’s performance

Raytheon (RTN) is one of the leading contractors and aerospace companies in the US. It performed well in 4Q14. The company’s revenue grew substantially—compared to the same quarter last year. Its revenue reached $6.1 million. The 4.7% year-over-year, or YoY, growth was driven by continued global demand for its advanced solutions. It was also driven by the solid strategy execution from all of its segments.

During the quarter, the company spent $153 million on capital expenditure. This was higher than last year’s $115 million. It issued $600 million in long-term debt. The company also had bookings worth $7.1 billion in the quarter. This was 5.4% lower than $7.5 billion in the same quarter last year.

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The total operating margins shot up by 200 basis points from last year’s figures to stand at 14.1% at the end of the quarter. The decline in margins was due to the margin decline in the SAS (Space and Airborne Systems) segment. It was partially offset by the margin growth in the IDS (Integrated Defense Systems) and IIS (Intelligence, Information and Services) segments.

The quarter saw strong operating cash flows from continuing operations of $829 million. However, this was lower than last year’s $1,106 million. The earnings per share, or EPS, stood at $1.86 per share. This was a strong 27.4% YoY growth from last year’s $1.48.

During 4Q14, the company also acquired Blackbird Technologies. This key acquisition is expected to help enhance the company’s offerings in the area of secure mobile communications, persistent surveillance, and cybersecurity solutions in operations and intelligence markets. Blackbird will contribute to Raytheon’s IIS business.

Other companies in the industry include Lockheed Martin (LMT), Northrop Grumman (NOC), and General Dynamics (GD). They also reported strong 4Q14 results.

Raytheon, Lockheed Martin, Northrop Grumman,  and General Dynamics form 1.82%, 2.88%, 1.83%, and 2.38% holdings of the Industrial Select Sector SPDR (XLI), respectively.

Estimate for 4Q15

The company expects to have a strong fourth quarter performance in 2015. Sales are expected to be $6.13–$6.27 billion. The EPS is expected to be $1.87–$1.90.

In the next part of this series, we’ll discuss the company’s financial performance on a full-year basis.

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