Raytheon hit as F-35 missile maker’s sales slow

Weapons manufacturer sees fourth-quarter slowdown as Patriot missile and Paveway bomb maker reports sales forecast for 2017 below analysts' estimates.

The Raytheon booth showcasing its weapons at the Singapore Airshow. The missile maker reported a slowdown for the fourth quarter. Wong Maye-E / AP

Raytheon reported a 1.4 per cent fall in quarterly revenue, hurt by slower sales in its units that make missile systems and tracking and navigation sensors used in aircraft and missiles.
The maker of Patriot missiles forecast 2017 sales of US$24.8 billion to $25.3bn, below analysts' average estimate of $25.55bn, according to Reuters.
The company said sales in its missile systems unit, which makes Paveway smart bombs and medium-range air-to-air missiles, rose 1 per cent to $1.90b in the fourth-quarter ended December 31, the slowest rise in six quarters.
The missile systems unit, which is Raytheon's biggest business, accounted for 29.4 per cent of its 2016 revenue. Lockheed's next generation F-35 fighter jet will be armed with AIM-9X Sidewinder missiles and Paveway munitions and among others, the company said last year.

When the new fighter jet is operational, it will also be equipped with the company’s modernised Joint Miniature Munitions Bomb Rack Unit, or JMM BRU. Working with the US Naval Air Systems Command, Raytheon developed a bomb carriage and release system that will allow more weapons to be carried inside the aircraft at one time, which helps it remain undetected by enemies in the air.

“This type of ‘smart rack’ is setting new standards for capability, reliability, durability, communication, software and integration for aircraft armament equipment,” said Rimas Guzulaitis, the senior director for Platform Sustainment and Modernization at Raytheon’s Intelligence, Information and Services business. “The JMM BRU was designed to be easily maintained by operators in the field, with interchangeable parts and a more simple design so the rack will be out for service less time and the aircraft readiness levels will increase.”

Sales in Raytheon’s space and airborne systems business, its second-biggest unit by revenue, recorded the slowest growth in four quarters, with a 2 per cent rise. The unit contributed 25.6 per cent to its full-year sales.

The company’s total sales fell to $6.24bn from $6.33bn a year earlier.

Raytheon said there were four fewer work days in the fourth quarter, compared with the same period a year earlier, reducing its sales by about $100 million per day.

Income from continuing operations attributable to Raytheon shareholders fell 2.5 per cent to $544m, or $1.84 per share, in the fourth quarter from $558m, or $1.85 per share, a year earlier.

Raytheon said its tax-related earnings were reduced by 4 cents per share as it made a $500m pretax discretionary pension plan contribution in the quarter.

The company, which adopted a new revenue recognition standard from January 1, said it expected earnings from continuing operations of $7.20 to $7.35 per share for 2017.

Raytheon said the impact of adopting the new accounting standard on the company’s 2015 and 2016 net sales and operating income was not material.

Bookings fell 3.6 per cent to $7.58bn in the fourth quarter, but were up 10.3 per cent to a record $27.84bn for the full year. Bookings is a forward-looking metric that measures the value of firm orders won by Raytheon.

Raytheon’s shares had risen 23.9 per cent in the past 12 months up to Wednesday’s close of $146.87, compared with a 29.7 per cent increase in the Dow Jones US Aerospace & Defense index .

* Agencies

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