Highlights From Raytheon's (RTN) Q2 Conference Call; Guides Higher for FY

July 23, 2009 5:46 PM EDT

Raytheon (NYSE: RTN) reports Q2 earnings of $1.24 per share, above the consensus of $1.13. Revenues came in at $6.13 billion, versus the consensus of $6.18 billion. Shares ended 1.7% higher today.

Highlights From RTN's Q2 Conference Call:

• Sees FY09 EPS of $4.60-$4.75 versus prior range of $4.55-$4.70 and the consensus of $4.73. Sees FY09 revenues of $24.5-$25 billion, versus the consensus of $24.78 billion.
  
• (Chairman/CEO) Our sales were up 4%, EPS was up 25%, and we continued to have good cash flow.
  
• We also had strong bookings ending the quarter with $37 billion backlog. 29% of our bookings came from international customers and 18% came from classified awards.
  
• At the Paris Air Show last month, I had the opportunity to meet with many of our domestic and international customers. Now it's encouraged by what I heard.
  
• We expect to continue to perform well in the second half of the year and we are optimistic about our future.
  
• (CFO) EPS from continuing operations was $1.24, up 25%. Income from continuing operations of 504 million was up 17% and our book-to-bill ratio was 1.2 times. Operating cash flow from continuing operations during the quarter of 512 million was above the high-end of our prior guidance, primarily due to timing.
  
• For the full year, we expect that total gross cash contributions to our plans to be 1.1 billion, in line with our total contributions in 2008.
  
• During the quarter, IDS booked 877 million to provide advanced Patriot Air & Missile Defense capability
  for several domestic and international customers, including the U.S. Army, the UAE, Taiwan and Kuwait.
  
• TS booked 553 million for work on the Warfighter FOCUS contract for the U.S. Army, bringing the year-to-date bookings on the program to $731 million.
  
• Backlog at the end of Q2 was 37.3 billion, compared to 37.5 billion at the end of Q2 of 2008.
  
• Missile Systems net sales 1.4 billion were up from last year, driven by higher volume on the Phalanx Weapon Systems. Network Centric Systems net sales of 1.2 billion were also up, driven by increased volume on U.S. Army programs.
  
• Space and Airborne Systems had net sales of 1.1 billion, up 6% versus Q2 of 2008.
  
• Services had net sales of 780 million, up 21% the result of strong growth on training programs, primarily Warfighter FOCUS and ATCOTS.
  
• We now expect sales to be in the range of between 25.5 and $25 billion, an increase of $100 million. We've raised our EPS guidance by $0.05 to a range of between $4.60 and $4.75.
  
• We've increased our guidance for ROIC by 10 basis points to between 11.2 and 11.7% to reflect the continued improvement in our operational performance.
  
• (Q&A) And then just Dave as you talk about cadence in the second half of the year you've more days in Q3 but clearly based on your guidance more revenue in Q4, could you walk a little bit through the mechanics of that? (A) Yeah. We're just - Q4 is always our strongest quarter from a cadence standpoint. In the guidance we provided in the appendix, we're just getting a little more precise relative to Q3 and Q4. There's nothing in particular going on there. (A) I should say one thing just so that there is no confusion on the call. We expect our bookings this year to be about 25 billion plus or minus 500 million for those that track us all the time you'll remember at the beginning of the year, we were about 24 billion, 500 million plus or minus. So this quarter we kind of believe we'll be up, we took at least internally our guidance up about 500 million, so we expect bookings to be strong this year.
  
• Bill, could you update us on your foreign potentials, Lockheed mentioned that Taiwan PAC-3 order they expect coming up, but just kind of take us through that. And essentially what percent you expect international to be of your bookings this year? (A) Let me start with the back half at least on international. 29% as I mentioned was bookings this quarter, year-to-date we are running around 28. We expect
  our bookings to be about 25 to 30% this year international. International sales year-to-date are about 20%. We expect - we should be in the range of anywhere from 20 to 22% this year. So that will be in volume-wise double-digit growth year-over-year. So that puts the mean perspective. As far as opportunities, we think our international pipeline is strong. We are off to a good start this year with various programs, whether it's Traffic Control satellites award for India, Japan airborne radars, we've got Phalanx upgrades even
  for Canada and then of course, AMRAAM and 9X continue to do well around the world. I went through where we think things are Patriot, we've got surface-launch AMRAAM, we've got opportunities in Australia on
  self-defense and we've got a couple of good size classified international efforts on border security that we expect. So for us, I'll add a little more color. We're still going through UAE Patriot, great customer there and continue to do well with the bookings with them. Saudi Arabia will be upgrading their missiles and probably ground hardware some time this year or next year. Taiwan, we expect them to purchase new systems may be in the fourth quarter of this year, first quarter of next year. And of course we've got Kuwait, Turkey, Qatar, and I could go on of countries there. Surface-launched AMRAAM, Dave mentioned Finland, we expect the UAE will buy there for lower tier. And then in self-defense, we are hoping to hear on the Australian land 17 and then I mentioned international classified. So lot a lot of activity going on in international.

Raytheon Company designs, develops, manufactures, integrates, and supports technological products, services, and solutions for governmental and commercial customers in the United States and internationally.

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