Raytheon Reports Strong Second Quarter 2019 Results

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Raytheon Company has announced net sales for the second quarter 2019 of $7.2 billion, up 8.1% compared to $6.6 billion in the second quarter 2018. Second quarter 2019 EPS from continuing operations was $2.92 compared to $2.78 in the second quarter 2018. The increase in the second quarter 2019 EPS from continuing operations was primarily driven by operational improvements and pension-related items, partially offset by a favorable tax-related EPS impact of $0.33 in the second quarter 2018 related to a discretionary pension plan contribution.

"The company had very strong second quarter operating results, with our bookings, sales, operating margin, EPS, and cash flow all exceeding our expectations," said Thomas A. Kennedy, Raytheon chairman and CEO. "We begin the second half with continued confidence in our growth outlook given our innovative technologies, breadth of franchises, and record backlog.

"Integration planning for the merger with United Technologies is progressing well, with the integration team developing detailed execution plans to capture revenue and cost synergies rapidly and ensure seamless operations post close. We continue to expect the transaction to close in the first half of 2020."

Operating cash flow from continuing operations for the second quarter 2019 was $823 million compared to $1,156 million for the second quarter 2018. The decrease in operating cash flow from continuing operations in the second quarter 2019 was primarily due to the timing of collections. Operating cash flow from continuing operations for the second quarter 2019 was better than the company's prior guidance.

In the second quarter 2019, the company repurchased 1.7 million shares of common stock for $300 million. Year-to-date 2019, the company repurchased 4.4 million shares of common stock for $800 million.

The company had record bookings of $9.5 billion in the second quarter 2019, resulting in a book-to-bill ratio of 1.32. Second quarter 2018 bookings were $8.7 billion.

Integrated Defense Systems (IDS) had second quarter 2019 net sales of $1,641 million, up 8% compared to $1,514 million in the second quarter 2018. The increase in net sales for the quarter was primarily driven by higher net sales on various international Patriot programs.

IDS recorded $264 million of operating income in the second quarter 2019 compared to $262 million in the second quarter 2018.

During the quarter, IDS booked $485 million and $375 million to provide advanced Patriot air and missile defense capability for Romania and the State of Qatar, respectively. IDS also booked $506 million for National Advanced Surface-to-Air Missile System (NASAMS) for Australia; $344 million on the Army Navy/Transportable Radar Surveillance-Model 2 (AN/TPY-2) radar program for the Kingdom of Saudi Arabia; $206 million on the Multi-Function Radio Frequency System (MFRFS) program for the U.S. Army; and $93 million to provide engineering support services for an international customer.

Shortly after the quarter close, as previously announced, IDS received a direct commercial contract worth approximately $1.8 billion to provide NASAMS to the State of Qatar.

Intelligence, Information and Services (IIS) had second quarter 2019 net sales of $1,777 million, up 5% compared to $1,687 million in the second quarter 2018. The increase in net sales for the quarter was primarily driven by higher net sales on classified programs in both cyber and space.

IIS recorded $161 million of operating income in the second quarter 2019 compared to $128 million in the second quarter 2018. The increase in operating income for the quarter was primarily driven by higher net program efficiencies.

During the quarter, IIS booked $821 million on a number of classified programs. IIS also booked $146 million on domestic and foreign training programs in support of Warfighter FOCUS activities, and $105 million to provide cybersecurity support for an international customer.

Missile Systems (MS) had second quarter 2019 net sales of $2,210 million, up 8% compared to $2,051 million in the second quarter 2018. The increase in net sales for the quarter was primarily due to higher net sales on classified programs, the High-speed Anti-radiation Missile (HARM) program, and the Phalanx program.

MS recorded $253 million of operating income in the second quarter 2019 compared to $231 million in the second quarter 2018. The increase in operating income for the quarter was primarily due to a favorable change in program mix and higher volume.

During the quarter, MS booked $477 million for AIM-9X Sidewinder short-range air-to-air missiles for the U.S. Navy, U.S. Air Force and international customers; $232 million for Tube-launched, Optically-tracked, Wireless-guided (TOW) missiles for the U.S. Army, U.S. Marine Corps and international customers; $200 million for Excalibur for the U.S. Army; $190 million for the Coyote Rapid Development Program (CRDP) for a U.S. customer; $120 million for StormBreaker for the U.S. Air Force; and $101 million for HARM for the U.S. Air Force and international customers. MS also booked $448 million on a number of classified contracts.

Space and Airborne Systems (SAS) had second quarter 2019 net sales of $1,817 million, up 13% compared to $1,605 million in the second quarter 2018. The increase in net sales for the quarter included higher net sales on classified programs, the Next Generation Overhead Persistent Infrared (Next Gen OPIR) program, and an international tactical radar systems program.

SAS recorded $229 million of operating income in the second quarter 2019 compared to $206 million in the second quarter 2018. The increase in operating income for the quarter was primarily due to higher volume.

During the quarter, SAS booked $218 million for radar components for the U.S. Navy; $93 million for the Multi-Spectral Targeting System (MTS) for the U.S. Air Force; $88 million for radar warning receivers for the U.S. Air Force; and $77 million for missile seekers for the U.S. Navy and an international customer. SAS also booked $876 million on a number of classified contracts.

About Raytheon

Raytheon Company, with 2018 sales of $27 billion and 67,000 employees, is a technology and innovation leader specializing in defense, civil government and cybersecurity solutions. With a history of innovation spanning 97 years, Raytheon provides state-of-the-art electronics, mission systems integration, C5I products and services, sensing, effects, and mission support for customers in more than 80 countries. Raytheon is headquartered in Waltham, Massachusetts.