Will Higher Sales Volume Drive Raytheon's (RTN) Q4 Earnings?
Zacks Investment Research | Jan 28, 2019 06:06AM ET
Raytheon Company (NYSE:RTN) is scheduled to release fourth quarter and 2018 results on Jan 31, before the opening bell.
The company's revenues are anticipated to be driven by a consistent order inflow, which along with lower taxes are likely to benefit its earnings in the to-be-reported quarter. Last reported quarter, the company delivered a positive earnings surprise of 15.98%.
Let's take a closer look at the factors influencing Raytheon's quarterly results.
Why a Likely Positive Earnings Surprise
Our proven model shows a likely earnings beat for Raytheon this quarter. That is because a stock needs to have both a positive
Raytheon Company Quote
Missile Systems: A Key Catalyst:
Over the last few quarters, Raytheon’s Missile Systems (MS) business unit that represents almost 30% of the company's total sales continues to be one of the major revenue drivers. Keeping this trend alive, Raytheon is poised to benefit from this unit in the fourth quarter as well. In line with this, the Zacks Consensus Estimate for the MS segment’s fourth-quarter sales is pegged at $2,479 million, reflecting year-over-year growth of 13.5%.
During the quarter, the MS segment successfully secured some major contracts from both the Pentagon and its overseas customers. Notably, it secured a $692.9-billion contract for the production of Sweden's Patriot Integrated Air and Missile Defense System, including spare parts, support and training along with a $434-million deal for the production of 766 AIM-9X and 160 AIM-9X Block II+ missiles.
Moreover, the Romanian government signed an agreement with the U.S. Army for purchasing three additional Patriot Missiles. Such impressive order inflows should boost this unit’s backlog, which we expect to get reflected in the to-be-reported quarterly results.
Other Factors Under Consideration
Increased sales volume expectation for other segments of the company has made us optimistic about Raytheon’s top-line growth in the fourth quarter. Notably, the Zacks Consensus Estimate for its fourth-quarter revenues is pegged at $7,502 million, reflecting year-over-year improvement of 10.6%.
Fourth-quarter results are expected to maintain the solid bookings trend of the first three quarters of 2018.
Solid revenue growth and lower tax rate are expected to boost Raytheon’s bottom line in the fourth quarter. Moreover, favorable FAS/CAS Operating Adjustment and the retirement benefits non-service expenses are projected to benefit the company’s earnings this time. To this end, the Zacks Consensus Estimate for Raytheon's fourth-quarter earnings pegged at $2.89 reflects year-over-year surge of 42.4%.
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