Raytheon falls most since 2012 as first-quarter sales decline

WASHINGTON – Raytheon Co., the world’s largest missile maker, reported a 6.3 percent decline in first-quarter sales, reflecting a slowdown in the federal marketplace. The shares fell the most since November 2012.

Raytheon was the last of the top five U.S. government contractors to release quarterly earnings this week, and it had the biggest drop in revenue. Sales fell to $5.51 billion, with decreases across all four divisions, the government’s fourth-biggest contractor said in a statement today.

Net income from continuing operations rose 20 percent to $589 million, or $1.87 a share, in the quarter, which included $80 million for a one-time tax benefit. That compared with $490 million, or $1.49 a share, a year earlier. The average estimate of 20 analysts surveyed by Bloomberg was $1.77 a share.

The company, based in Waltham, Mass., reaffirmed its profit forecast in January of $6.74 to $6.89 a share on sales of $22.5 billion to $23 billion.

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Raytheon fell 5 percent to $95.20 at 9:42 a.m. in New York, the biggest decline since Nov. 7, 2012. It had risen 75 percent in trading in the past 12 months, compared with a 19 percent gain in the Standard & Poor’s 500 Index during that time.

Pentagon spending is slowing as the U.S. withdraws combat troops from Afghanistan and the military absorbs automatic federal budget cuts.

Patriot missiles

Raytheon is seeking to boost international and cybersecurity sales, Chief Financial Officer Dave Wajsgras said in an interview today. Overseas business accounted for 39 percent of first-quarter bookings, which included a $655 million contract to provide fire units for a Patriot air- and missile-defense system in Kuwait, he said.

Wajsgras said he expected U.S. government business to increase in the second half of the year. “We feel good about the way we will finish out 2014,” he said.

Some of the automatic federal spending cuts planned under a process known as sequestration were reduced when President Barack Obama in January signed a $1.1 trillion spending bill to fund the government through Sept. 30.

Tom Kennedy, Raytheon’s CEO, said on a conference call with investors that he was encouraged by the president’s budget request for fiscal 2015.

Earlier this week, Lockheed Martin Corp., the largest federal contractor, No. 3 General Dynamics Corp. and No. 5 Northrop Grumman Corp. reported higher profits even as sales declined due to U.S. budget cuts and a slowdown in war spending.

Business jets

The top contractors have been buying back stock, and most have cut costs and increased dividends to satisfy investors.

In the first quarter, Raytheon spent $200 million to repurchase 2.1 million shares and boosted its dividend 10 percent to $2.42 a share.

Diverse portfolios helped both General Dynamics and Boeing Co., the second-largest U.S. vendor. Boeing’s profit in the quarter topped analysts’ estimates – and the strength of its civilian airline business made it the only company among the top five to report an increase in sales.

General Dynamics’s sales dipped 1.1 percent in the quarter, less than the others that reported drops, as a sharper decline was averted due to a 20 percent gain in aerospace revenue driven by Gulfstream business jet deliveries.

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