(Reuters) ? Defense contractors Raytheon Co and L-3 Communications Holdings topped Wall Street profit estimates on Thursday, citing rising backlogs even as sales softened in wake of budget challenges.
Results at Goodrich, a supplier of plane parts, were buoyed by strong commercial equipment and servicing sales.
"We're taking all the right actions from an earnings and cash flow impact to offset the impact of sales being slightly down," Raytheon Chief Financial Officer Dave Wajsgras said. He added the company has stepped up efforts to cut costs.
Defense contractors are shedding noncore units and reducing headcount in preparation for leaner global defense budgets. They are also buying back shares to boost shareholder returns given an uncertain outlook for spending.
The Defense Department, the world's biggest weapons buyer, is looking to cut at least $350 billion in spending over the next 10 years and could be forced to make steeper cuts should a congressional supercommittee fail to identify $1.2 trillion in government savings later this year.
Delays in contract funding and program cuts have hurt company revenues, and both Raytheon and L-3 cut their full-year sales outlooks on Thursday. Cost-cutting efforts are also impacting sales as some defense firms reduce their exposure to lower-margin work.
"For various different reasons, some bookings have moved to the right which has impacted sales in the near term," Raytheon's Wajsgras said. He added sales for the current period would likely be affected by U.S. budget issues.
General Dynamics Corp and Northrop Grumman also posted lower quarterly sales this week. Lockheed Martin Corp , the industry leader, had higher third quarter sales but forecast flattish sales in 2012.
Raytheon raised its full-year forecast and said bookings, an important gauge of customer demand, strengthened domestically and internationally. Backlog also increased.
Net income at Raytheon was $501 million, or $1.43 a share, in the third quarter, down 31 percent from a year earlier. Analysts expected $1.33 a share, according to Thomson Reuters I/B/E/S. Revenue fell 2 percent to $6.13 billion.
L-3 Communications, which plans to spin off some parts of its government services business next year, said third-quarter earnings were $235 million, or $2.24 a diluted share, better than the $2.15 a share expected by analysts.
L-3, whose products monitor and gather intelligence, said funded orders increased to $4.5 billion in the third quarter from $3.5 billion a year earlier, while quarterly sales fell 1 percent to $3.79 billion.
Goodrich, which has agreed to be acquired by United Technologies, said earnings rose about 26 percent to $201 million, or $1.57 a share. Adjusted for merger costs, profit was $1.70 a share, against $1.50 expected by analysts. Goodrich, which derives about a third of its revenue from defense, said total sales rose 16 percent to $2.03 billion.
Shares at L-3 were up 1.9 percent to $69 in morning trading while Raytheon eased 0.1 percent to $42.40. Goodrich, which is being acquired for $127.50 a share, was up 0.4 percent at $122.94.
(Reporting by Karen Jacobs, editing by Dave Zimmerman)
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