RTN Raytheon Co

By Doug Cameron 

Raytheon Co. on Thursday raised its full-year profit guidance to complete a clean sweep of improved outlooks among the largest U.S. military contractors that have driven their share prices to record highs.

Improving military budgets and cost cuts have marked 2016 as a turnaround year for the defense sector, with sales starting to climb after three years of decline and cash funneled back to investors who viewed it as more resilient than industrial companies more exposed to the slowdown in emerging markets.

Raytheon, which has the largest exposure to overseas markets among U.S. military contractors, joined larger peers including Lockheed Martin Corp. and Boeing Co. in raising its profit expectations for the year as conflicts in the Middle East boosted demand for bombs and missiles.

Rising profits have helped defense stocks outperform the broader market and outweighed emerging concerns over some troublesome military programs and the prospect of higher pension costs in a sector that has some of the largest unfunded liabilities among any U.S. companies.

Raytheon Chief Executive Tom Kennedy said in a statement that its orders, profits and cash flow were all ahead of internal expectations in the latest quarter, echoing sentiments expressed by peers over the past week.

The company reported net profit of $704 million for the second quarter, compared with $503 million a year earlier, with per-share earnings rising to $2.38 from $1.65 as sales rose 3% to $6 billion. All four units at the maker of Patriot missile-defense systems and Paveway laser-guided bombs reported higher profits, including its Forcepoint cybersecurity business.

Raytheon retained its forecast for revenue to climb to between $24 billion and $24.5 billion in 2016 -- compared with $23.2 billion last year -- but lifted per-share profit guidance to $7.13 to $7.33, up 20 cents from its prior guidance. It also bumped its cash flow guidance by $100 million to a range of $2.8 billion to $3.1 billion.

Raytheon shares are up 3% in premarket trading. Its shares are up 8.7% so far this year, outpacing the 6% rise in the S&P 500, though lagging a 17% gain by Lockheed Martin and the 15% advance by Northrop Grumman.

Write to Doug Cameron at doug.cameron@wsj.com

(END) Dow Jones Newswires

July 28, 2016 07:30 ET (11:30 GMT)

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