January 30, 2020 / 1:57 PM / 2 months ago

Weapons maker Raytheon tops profit estimates on strong international demand

(Reuters) - U.S. weapons maker Raytheon Co topped Wall Street estimates for quarterly profit on Thursday as strong international demand spurred sales in its defense systems unit, which makes the Patriot missile-defense system and surveillance radars.

CFO Toby O’Brien told Reuters in an interview on Thursday that for 2020 “we see strong sales growth for the year 6 to 8 percent.” He said “international and domestic are both expected to grow again in 2020 as they did in 2019.”

Defense contractors are expected to benefit from tensions between the United States and Iran after a top Iranian military commander was killed in a U.S. drone strike in Baghdad on Jan. 3, prompting Iran to retaliate with a missile attack against a U.S. base in Iraq days later.

Sales in Raytheon’s integrated defense systems unit, which also makes naval navigation systems and torpedoes, rose 17.6% to $1.98 billion in the fourth quarter ended Dec. 31. Margins in the unit rose to 15.5% from 14.7%.

The company’s defense unit gained from two international missile defense orders received in the third quarter, and it also booked contracts for its Patriot missile-defense system worth $1.1 billion.

Sales at Raytheon’s missile systems unit, its largest, rose 1.2% to $2.35 billion in the quarter, while margins increased to 12.7% from 11.8%. O’Brien said he was pleased with the profit margin performance, but acknowledged the sales growth of 1% during the quarter was not as expected. He said that “some timing on some supplier deliveries, on some production programs” was the issue, adding “but nothing permanent.”

The unit makes weapons including radar threat-countering high-speed anti-radiation missiles and rapid-fire, radar-guided guns for ships.

The company said that its planned $120 billion merger with United Technologies Corps is expected to close early in the second quarter of this year.

“We don’t see any showstoppers,” with regard to formal regulatory approvals for the merger, O’Brien said.

Raytheon’s earnings from continuing operations rose to $3.16 per share in the quarter, from $2.93 per share a year earlier, beating analysts’ average estimate of $3.12 per share, according to IBES data from Refinitiv.

Total sales rose 6.5% to $7.84 billion, but were below Wall Street’s estimate of $8.01 billion.

Reporting by Sanjana Shivdas in Bengaluru and Mike Stone in Washington, D.C.; Editing by Krishna Chandra Eluri and Chizu Nomiyama

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