Sensors, training keep Raytheon strong through first quarter

The U.S. military’s desire for more surveillance equipment and new ways to prepare soldiers for war drove positive first-quarter growth at Raytheon Co., reports Christopher Hinton at MarketWatch.

Raytheon reported April 22 that profit from continuing operations during the recent period climbed from $1.13 a share a year earlier to $1.18 a share, while net sales rose from $5.9 billion to $6.1 billion.

Analysts had expected profit of $1.10 a share on sales of $6.2 billion.

"The threat environment has evolved over the last four to eight years...and the priorities now front and center from a DOD perspective line up well with the core components at Raytheon," David Wajsgras, the company’s chief financial officer, said of the results.

The company generated operating cash flow from continuing operations of $257 million in the first quarter, which included federal and foreign tax payments of $59 million.

DOD's continuing demand for aircraft sensors, coupled with mission training programs and support for military personnel, speak to the core of Raytheon’s business, Wajsgras said.

"We are impressed by Raytheon's continued ability to grow orders and backlog despite what we view as a tough defense environment," said Richard Tortoriello, an equity analyst for Standard & Poor's, in a note in which he raised his rating for the company to buy from hold.

Shares of Raytheon nonetheless fell 1.3 percent in recent trading to $59.25, coming off an 18-month high of $60.10. Over the last year, the stock has climbed about 43.5 percent.

Earnings at the company's two largest units, missile systems and network-centric systems, were relatively flat. But space and airborne systems, which builds intelligence, surveillance and reconnaissance platforms for unmanned aircraft, and technical services such as military training, climbed sharply.

"Training is a very important business for us," Wajsgras said. "Training continues to be in great demand by both domestic and foreign militaries."

On a general accounting basis, which includes the impact of a pension expense, Raytheon said it earned $445 million, or $1.16 a share, compared to $452 million, or $1.12 a share, in the year-ago period.

Raytheon, of Waltham, Mass., ranks No. 5 on Washington Technology's 2009 Top 100 list of the largest government contractors.