When Raytheon (NYSE:RTN) releases its third quarter earnings on Thursday, October 25, 2012, analysts are expecting a 8.6% drop in earnings from a year ago. The consensus estimate is $1.27 per share, down from earnings of $1.39 per share a year ago.

Earnings season is important to investors because it shows how much profit is left in the company's hand after deducting costs from revenue. SEE: 5 Tricks Companies Use During Earnings Season

What to Expect: Three months ago, the consensus estimate was $1.29. For the fiscal year, analysts are projecting earnings of $5.33 per share.

Raytheon is expected to beat last year's reported revenue of $6.13 billion and come in at $6.16 billion for the quarter. Raytheon is expected to report revenue of $24.54 billion for the fiscal year.

Company Performance: Raytheon has experienced four consecutive quarters of revenue decline. It fell 3.7% in the second quarter, 2% in the first quarter, 6.4% in the fourth quarter of the last fiscal year and 2.2% in the third quarter of the last fiscal year.

The P/E ratio for RTN is 9.7, above the industry average of 7.72. Usually, if a stock has a high P/E ratio, it indicates that the market expects the company to grow earnings quickly in the future. A simple P/E ratio can reveal the stock's real market value and show how the valuation compares to its industry group or a benchmark like the S&P 500 Index. A high or low P/E ratio is not good or bad in and of itself, but a company trading with a high P/E ratio must continue to post strong financial performance or its stock price is likely to fall. SEE: How To Use The P/E Ratio And PEG To Tell The Future Of A Stock

The stock price has increased from $55.31 on July 24, 2012 to $55.87 over the past quarter. Raytheon's best recent streak was when its price gained $2.18 per share between October 12, 2012 and October 18, 2012.

The Competition: Raytheon provides electronics, mission systems integration and other capabilities to customers in defense, homeland security and other government markets throughout the world. The company's closest competitor in the aerospace and defense industry, Boeing (BA), will report earnings on October 24, 2012. Analysts are expecting earnings of $1.12 per share for Boeing, down 23.3% from last year's earnings of $1.46 per share. Analysts are more optimistic about Raytheon than about Boeing. Only 19 out of 22 analysts rate the latter a buy compared to six of 18 for the former.

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