By Doug Cameron
Raytheon Co. on Thursday reported a 10% rise in fourth-quarter
profit that, like its 2015 guidance, fell short of investor
expectations, even as the Pentagon's third-largest supplier
bolstered its backlog with more overseas orders.
The Waltham, Mass., company derives 30% of its sales from
international customers attracted to its lineup of missile-defense
systems, leading other U.S. contractors in countering a flat U.S.
defense budget with more overseas deals.
Raytheon is a closely watched barometer of the industry's health
because of its overseas exposure and a recent run of success in
winning Pentagon deals for new military radars and other electronic
equipment in the face of tough competition from rivals including
Lockheed Martin Corp. and Northrop Grumman Corp.
However, its stock has lagged behind gains by larger rivals, in
part because of delays in completing some large international deals
and a recent appetite for deals to drive growth when most rivals
have relied on share buybacks to boost earnings.
Raytheon Chief Executive Tom Kennedy has talked of boosting the
company's ratio of overseas sales to 40% by securing more deals for
its Patriot missile-defense system to countries in the Middle East
and Asia eager to bolster their deterrent to potential adversaries
including Iran, North Korea, Russia and China.
Defense analysts have questioned whether U.S.
companies--handicapped by U.S. government restrictions on exporting
sensitive military technology--can compensate for the flat Pentagon
budget by selling more weapons overseas. A recent McKinsey &
Co. report estimated that the big U.S. defense companies would only
mange to substitute $31 billion of international sales to counter
$50 billion of Pentagon cuts between 2012 and 2015.
Raytheon reported net profit of $586 million for the quarter
ended Dec. 31, compared with $533 million a year earlier, with
per-share earnings rising to $1.88 from $1.66.
Sales rose at all four of its divisions--having dipped across
the board in the prior quarter--rising to $6.1 billion from $5.9
billion a year earlier, with bookings of $7.1 billion in what is
traditionally the strongest quarter for closing international
deals. Margins rose at two units.
Full-year sales of $22.8 billion were within its forecast range,
while 2014 per-share profit rose to $7.18.
Raytheon forecast profit this year of $6.20 to $6.35 a share,
with sales of $22.3 billion to $22.8 billion.
Write to Doug Cameron at doug.cameron@wsj.com
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