Bernstein Likes Raytheon's 'International Growth Accelerator'

• Bernstein analysts led by Douglas S. Harned upgraded Raytheon Company RTN to Outperform.
• The experts set a $132 price target for the stock.
• Shares of Raytheon were slightly up on Wednesday.

In a report issued Wednesday, analysts at Bernstein explained that their upgrade of Raytheon is based on a “revised view of international defense opportunities and the fact that the costs of the Websense acquisition,” which they did not support, should be mostly behind the company.

The firm sees the revenue outlook as starting to surge with ameliorating backlogs, mostly driven by international sources. They expect international sales to represent 30 percent of 2015’s total revenue, as U.S. backlogs get stronger and international defense budgets rise, especially in areas where the company has large exposure – such as the Middle East and Asia.

Bernstein analysts also anticipate robust margins as Raytheon “focuses on cost performance and has favorable mix trends.”

On the other hand, analysts express their concerns regarding the Websense joint venture, which they think, “will be challenged to deliver on the company's growth objectives.” However, the costs of the purchase should be largely a thing of the past now.

As international sales continue to rise, same as defense sales (which are modestly surging), while new major investments in cybersecurity seem unlikely, “Raytheon's cash deployment profile should be more attractive in 2016."

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.