Shares in Raytheon Technologies Corp. rose Tuesday after the company reported fourth-quarter revenue and profits that beat analystsโ expectations.
The parent of Tucson-based Raytheon Missiles & Defense posted fourth-quarter sales of $16.4 billion and adjusted sales of $16.6 billion, as the COVID-19 pandemic continued to pummel its commercial aviation units, Pratt & Whitney and Collins Aerospace.
The company posted net income of $146 million, or 10 cents per share, after 64 cents per share in nonrecurring charges including accounting adjustments related to the April 2020 merger of United Technologies Corp. and Raytheon Co. that formed Raytheon Technologies.
When adjusted for the special charges, Raytheonโs adjusted earnings per share of 74 cents and its adjusted sales of $16.6 billion beat analyst expectations.
After jumping more than 4% in early trading, Raytheon shares closed Tuesday at $67.20, up 92 cents or about 1.4%.
CUTTING COSTS, SAVING CASH
Raytheon Technologies CEO Greg Hayes said the fourth-quarter results exceeded the companyโs expectations as it continued to control costs and reap the financial benefits of the merger.
โIn 2021, our strategy of harnessing next-generation technologies across our resilient and balanced portfolio will continue to drive differentiated value for customers and advance our industry leadership for years to come,โ Hayes said, adding that the company remains committed to returning $18 to $20 billion to shareholders in the four years following the merger.
The company issued an updated financial outlook for 2021, forecasting sales between $63.4 billion and $65.4 billion, lower than analystsโ estimates, and an adjusted earnings per share of $3.40 to $3.70, on the high side of analystโs estimates.
The company authorized a $5 billion share repurchase program in December and plans to repurchase at least $1.5 billion of shares in 2021.
The special fourth-quarter charges against earnings included 29 cents of acquisition accounting adjustments, 29 cents related to certain Middle East contracts, 5 cents for the economic impact of COVID-19 and 5 cents in restructuring charges, partially offset by other items.
AVIATION units hammered
Raytheon is cutting more than 15,000 jobs at its commercial aviation businesses as they continued to suffer from the impact of COVID-19 on air travel.
Aircraft engine maker Pratt & Whitney reported a 20% drop in fourth-quarter sales on an adjusted basis, as plummeting commercial aviation work was partially offset by an increase in military orders including sales of F-135 engines used in the F-35 fighter jet, while quarterly operating income plunged 78%.
At Collins Aerospace, which makes aircraft avionics and other components, adjusted fourth-quarter sales were down 32% from last year and operating profit plummeted 92%, Raytheon said.
DEFENSE SEGMENTS remain STRONG
Raytheon Missiles & Defense reported fourth-quarter sales of $4.4 billion and an adjusted operating profit of $586 million, and 2020 annual sales of $11.7 billion with an operating profit of $1.4 billion.
Major bookings by the Tucson-based unit in the fourth quarter included $354 million for a classified program; $240 million for production of StormBreaker precision-guided glide bombs for the Air Force; $234 million for TOW (Tube-launched, Optionally-tracked, Wireless-guided) anti-tank missiles; and $217 million for an radar sustainment program for the Missile Defense Agency.
Raytheon Intelligence & Space, which provides space-based and airborne sensors, radars, and cyberwarfare capabilities, posted fourth-quarter sales of $3.8 billion and an operating profit of $355 million.
10 Companies With Lower Tax Rates Than Most Americans
Amazon
Updated
Market value: $890.3 billion
Overall tax rate: 10.63%
Amazon.com (AMZN, $1,795.77) famously pays very little in taxes. The Institute on Taxation and Economic Policy reports that AMZN paid $0 in federal taxes last year and will owe Uncle Sam precisely nothing in 2019, as well.
Indeed, last year Amazon received a federal income tax rebate of $129 million, which gave the company a negative federal tax rate. Amazon avoids paying federal taxes using a variety of tax credits and tax exemptions that are legal and built into the U.S. federal tax code, experts say.
By WalletHub's reckoning, the e-commerce giant's state, federal and international taxes combined for an overall tax rate of 10.63% last year. That's not nothing, but it's well below the 21% overall tax rate paid by companies in the S&P 100.
AMZN reported net income of $10.1 billion in 2018. It paid $1.2 billion in cash taxes, according to S&P Global Market Intelligence.
Boeing
Updated
Market value: $199.3 billion
Overall tax rate: 9.86%
Over the 10 years spanning 2008 and 2017, Boeing (BA, $352.14) paid an effective federal tax rate of just 8.4% on its $54.7 billion of U.S. profits, according to the Institute on Taxation and Economic Policy. That slipped to 7.85% in 2018, according to WalletHub, thanks to Washington's overhaul of federal taxes and federal tax breaks for the aerospace industry.
Boeing also benefits from steep breaks on state taxes. In 2003, Washington state awarded Boeing a package of tax incentives valued at more than $3.2 billion that would last through 2024. In 2013, those incentives were extended through 2040, with a value believed to be around $8.7 billion. In 2018, the aerospace giant's state tax rate came to a skinflint 0.91%.
The company, for its part, notes that it has invested $13 billion in the state of Washington since 2013.
On the international stage, Boeing's tax rate came to 37.67%. Put it all together, and this Dow stock falls into an overall tax burden of less than 10%. As far as actual cash taxes are concerned, S&P Global Market Intelligence data shows Boeing paid $1.3 billion on net income of $10.5 billion in 2018.
Intel
Updated
Market value: $250.6 billion
Overall tax rate: 9.71%
Intel (INTC, $57.60) paid $3.8 billion in cash taxes last year on net income of $21.1 billion. The chip giant's overall tax rate, however, came to just 9.71%.
Intel, which is headquartered in California, enjoys some of the largest corporate tax breaks in the U.S. - from Oregon, where it employs more than 20,000 people. Other items helping to dampen Intel's tax burden include the company's roughly $10 billion annual investment in U.S. research and development. (Companies can deduct the costs of R&D from their taxable income in the year that the costs occur.)
That said, the tide might be turning against INTC on the tax front. Starting in 2022, the federal tax overhaul will require companies to amortize their R&D costs over five years, instead of deducting them immediately each year.
And in June, Intel subsidiary Altera lost a court case to the Internal Revenue Service over the treatment of cost-sharing agreements within corporations. The outcome of the case could cost companies such as Facebook (FB) and Electronic Arts (EA) tens of billions in dollars.
Honeywell
Updated
Market value: $129.2 billion
Overall tax rate: 8.80%
Major provisions of the U.S. Tax Cuts and Jobs Act are boosting Honeywell's (HON, $180.81) bottom line as it sends less cash to Uncle Sam.
The federal tax rate for the industrial conglomerate - which produces everything from home thermostats and humidifiers to aircraft engines and building management systems - fell to 12.85% in 2018 from 74.34% in 2017, according to WalletHub. The company's overall tax rate plunged to 8.8% from 75.40%.
On the state taxes front, Honeywell in late 2018 decided to move its headquarters to Charlotte, N.C., from New Jersey. In 2015, HON accepted a 10-year, $40 million deal to stay in the Garden State, and Honeywell still will honor the agreement by keeping roughly 1,000 jobs in the state. But North Carolina's largesse was too much to ignore. The Tar Heel State has a flat corporate income tax of 3%, the lowest such rate in the U.S. At the other end of the spectrum sits New Jersey, which has a top rate of 9% for its marginal corporate income tax.
HON paid cash taxes of $1.6 billion in 2018 - down from the $1.8 billion it paid the previous year, according to S&P Global Market Intelligence.
Raytheon
Updated
Market value: $60.0 billion
Overall tax rate: 8.39%
Raytheon (RTN, $215.33) immediately saw the benefits of corporate tax cuts last year, which helped boost the bottom line - and allowed RTN to splurge $1.3 billion on stock buybacks. The defense contractor best-known for Tomahawk missile, saw its overall tax rate drop to 8.39% from 35.79% in 2017.
The company also gets a lift from state taxes. Although the federal tax rate declined to 6.91% in 2018 from 34.92% the prior year, state taxes were negligible in both periods. Raytheon's state tax rate was a mere 0.1% in 2018. In 2017, it was essentially zero.
Raytheon was gunning for an $8.4 million state excise tax refund, but that was recently shot down by the Appeals Court of Massachusetts for, essentially, being late to apply. But RTN isn't hurting. Raytheon paid a total of just $17 million in cash taxes in 2018, according to S&P Global Market Intelligence, against $2.9 billion in net income.
Adobe
Updated
Market value: $139.1 billion
Overall tax rate: 7.27%
Adobe (ADBE, $287.40), which dominates the market for software for creative types, had an overall tax rate of just 7.27% last year.
A breakdown reveals that Adobe's tax rate is enviably low across the board. It had a federal tax rate of 6.48%, a state tax rate of 6.88% and an international tax rate of 5.8%, according to WalletHub. The net effect makes ADBE one of the five lowest corporate taxpayers among S&P 100 companies that pay any taxes.
Indeed. In 2018, the software colossus paid cash taxes of only $210 million, down from $397 million the previous year, according to S&P Global Market Intelligence.
The low impact of taxes is a welcome relief for shareholders, who are concerned that Adobe could report annual revenue growth of less than 20% in calendar 2020, down from 24% in 2018, note analysts at Canaccord Genuity.
Pfizer
Updated
Market value: $208.0 billion
Overall tax rate: 5.95%
Pfizer (PFE, $37.25) recorded a $10.7 billion gain from the tax overhaul in early 2018. Funnily enough, investors were hoping for an even bigger drop in its corporate tax bill stemming from the Tax Cuts and Jobs Act.
The pharmaceutical giant plans to pay around $15 billion in taxes over the next eight years as it repatriates its cash held overseas.
Pfizer's overall tax rate came to just 5.95% in 2018 because a net loss saved the company from paying state and federal taxes. Its international tax rate came to 13.96%, according to WalletHub. In 2017, negative income spared it from state and federal taxes. Net tax benefits gave PFE a negative overall tax rate of 73.54%.
Be that as it may, deferred taxes and other monies owed to the IRS led Pfizer to pay $3.7 billion in cash taxes last year, according to S&P Global Market Intelligence.
General Motors
Updated
Market value: $54.9 billion
Overall tax rate: 5.54%
General Motors (GM, $38.42) famously paid little to no federal taxes for years, and the situation is expected to continue for another five years.
In 2018, for example, the automaker recorded $4.3 billion in U.S. income and received a federal tax refund of $104 million. This enviable situation stems from the huge losses GM incurred prior to its 2009 bankruptcy filing.
The tax code allows net losses to be carried forward and applied to future profits, reducing tax liability. The popular tax break is intended to help companies get back on their feet after suffering net losses.
General Motors gets a big break from Uncle Sam; nevertheless, it still pays state and international taxes. The company's state tax rate came to 8.19% in 2018 vs. a net tax benefit in 2017. Its international tax rate declined to 40.60% from 284.38%, according to WalletHub.
GM paid cash taxes of $660 million in 2018, according to S&P Global Market Intelligence.
Exelon
Updated
Market value: $43.6 billion
Overall tax rate: 5.38%
Exelon (EXC, $44.82) boasts the second-lowest tax rate of any company in the S&P 100 in 2018%. Zero-emissions credit revenue in New York, New Jersey and Illinois, as well as savings from the Tax Cuts and Jobs Act of 2017, helped to lighten its tax load.
Exelon's overall tax rate was as high as 38.26% as recently as 2016, and it paid 32.18% in 2015. Today, it stands at just 5.38%.
Around this time last year, an appeals court affirmed that Exelon dodged about $1 billion in taxes related to the sale of a coal plant in 2000. The decision didn't affect the company's bottom line, however, because it already paid back taxes, interest and penalties on money owed to the IRS.
In 2018, Exelon paid cash taxes of just $95 million on net income of $2 billion, according to S&P Global Market Intelligence.
Netflix
Updated
Market value: $126.5 billion
Overall tax rate: 1.24%
Netflix (NFLX, $288.59), the mammoth streaming media and production giant, had the lowest overall tax rate among the massive companies in the S&P 100 last year, WalletHub says.
Negative state and federal tax rates of 7.41% and 7.05%, respectively, almost completely offset an international tax rate of 36.06%.
Although Netflix booked a 2018 U.S. profit of $845 million, according to the Institute on Taxation and Economic Policy, it received money back from state and federal tax authorities. It's unclear how that came to be, but one possibility is that NFLX was able to claim a tax credit on some of its foreign earnings to avoid double taxation. In other words, that 36% international tax rate allowed Netflix to claim a refund in the U.S.
Indeed, Netflix has benefitted from the vagaries of tax codes both in the U.S. and abroad. In 2018, NFLX received a 57,000-euro tax rebate (roughly $63,000) from the U.K. government.
