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Defense Breakdown: Raytheon Company (RTN), General Dynamics Corporation (NGD), United Technologies Corporation (UTX)

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Sequestration budget cuts have already started slashing into the U.S. defense budget and unprepared defense contracts are soon going to start feeling the pain.

This article sets out the geographical split of revenues across four major U.S. government defense contractors. The purpose of this is to highlight players in the defense sector within the U.S., analyzing each company to establish if they have diversified outside of the U.S. enough to be protected from some of the spending cuts.

Raytheon Company (NYSE:RTN)

General Dynamics Corporation (NYSE:GD)

Division Revenue Year-Over-Year Change
Geographical Split — Revenue 2012
United States $25,004 -79.30%
Rest of the World $1,240 -3.90%
United Kingdom $1,027 -3.30%
Canada $878 -2.80%
China $876 -2.80%
Other $2,488 -7.90%

Figures in millions.

General Dynamics Corporation (NYSE:GD)’ adjusted 2012 full-year earnings from continuing operations were $2.3 billion. On a GAAP basis, the company reported a loss from continuing operations of $332 million.

During the fourth quarter, it recorded a $2 billion goodwill impairment related to its Information Systems and Technology group, which is one of the reasons that the company reported a GAAP loss. It also recorded $867 million in other charges in the quarter.

Unfortunately, the overwhelming majority (79%) of General Dynamics’ 2012 revenue is from defense spending in the U.S., with only 3% coming from the faster-growing Chinese market and a combined 21% for the rest of the world.

It should be noted that the 80% fall in revenues from U.S. operations is for the most part related to the company’s goodwill impairment and other charges. That said, General Dynamics Corporation (NYSE:GD) has very little diversification outside of the U.S., making it highly susceptible to spending cuts.

Raytheon Company (NYSE:RTN)

Divisional Split — Revenue 2012
Integrated Defense Systems $5,037 -19.10%
Intelligence & Information Systems $3,012 -11.40%
Missile Systems $5,693 -21.60%
Network Centric Systems $4,058 -15.40%
Space & Airborne Systems $5,333 -20.20%
Technical Services $3,239 -12.30%
Geographical Split — Revenue 2012
Asia Pacific $2,510 -10.30%
Europe $1,252 -5.10%
Middle East $2,470 -10.10%
United States $18,182 -74.50%

Figures in millions.

Like General Dynamics Corporation (NYSE:GD), Raytheon Company (NYSE:RTN) does most of its business in the U.S. However, unlike General Dynamics, Raytheon does about a quarter of its business outside the U.S.

Seventy-five percent of Raytheon’s 2012 revenue was from the U.S., 10% from Asia-Pacific, 10% from the Middle East, and 5% from Europe.

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