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Raytheon Board Approves 8.8% Hike in Quarterly Dividend

Zacks Equity Research
Updated

Raytheon Co.’s RTN board of directors approved a hike in annual dividend of 8.8%. This marks the 14th consecutive annual dividend increase by the company.

The company raised the quarterly dividend to 86.75 cents per share from 79.75 cents, bringing the annualized payout to $3.47 from $3.19 paid earlier. The annual dividend yield is 1.62%. The dividend will be paid on May 10 to shareholders of record as of Apr 11.

Raytheon’s Financials

A steady dividend payout policy primarily reflects Raytheon’s robust financial position and balanced capital deployment strategy. In fact, an increase in dividend at regular intervals has been one of the characteristic features of this defense major.

Raytheon ended fourth-quarter 2017 with operating cash flow from continuing operations of $1.6 billion, reflecting an increase of 45.4% year over year. Full-year earnings per share were $6.94, 8.8% lower than $7.55 recorded in the prior year.

Our View

Raytheon has been a consistent performer over the years, which is driving its share price and a quick peek into its recent earnings history reveals the same. Encouragingly, the company surpassed the Zacks Consensus Estimate in all of the trailing four quarters, with an average beat of 6.36%. The long-term earnings growth rate of the company is pegged at 10.90%.

As the world’s largest missile maker, Raytheon witnessed healthy demand for products, particularly from foreign customers. The company has been seeing continuous growth in international sales for the past few years. Its international sales rose 8.4% in fourth-quarter 2017. For full-year 2017, the company recorded over $8 billion of international sales, representing 32% of total sales. Notably, rising demand from the Middle East and North Africa region along with European and Asia Pacific markets will likely be the company’s key revenue driver.

Raytheon’s bookings in the fourth quarter were $8.54 billion compared with $7.58 billion in the year-ago quarter, reflecting a rise of 12.6%. Total backlog at the end of 2017 was $38.2 billion, compared to $36.7 billion at the end of 2016.

The fourth-quarter 2017 saw Raytheon winning a number of contracts like a $2.3-billion deal to support PATRIOT Missile Systems along with acquiring several other major contracts. Thanks to Raytheon’s wide range of combat-proven defense products and its widespread clientele base, the company continues to receive huge orders from Pentagon and the international markets.

Price Movement

Raytheon’s stock has returned about 38.4% in the last 12 months, compared with the industry’s gain of 36.2%. The outperformance was primarily led by strong international sales and a robust balance sheet.

 



Zacks Rank & Key Picks    

Raytheon currently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the same sector are Boeing BA, Huntington Ingalls HII and Curtiss-Wright Corporation CW. While Boeing and Huntington Ingalls sport a Zacks Rank #1 (Strong Buy), Curtiss-
Wright Corporation carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Boeing recorded an average positive earnings surprise of 20.69% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has risen by 27.84% to $14.05 in the last 90 days.

Huntington Ingalls recorded an average positive earnings surprise of 3.85% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has risen by 45.56% to $17.38 in the last 90 days.

Curtiss-Wright Corporation (CW) has an average positive earnings surprise of 15.06% for the last four quarters. The Zacks Consensus Estimate for 2018 earnings rose by 12.18% to $5.80 in the last 90 days.

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The Boeing Company (BA) : Free Stock Analysis Report
 
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