United Technologies Beats Q1 Earnings - Analyst Blog

United Technologies Corp UTX reported first quarter 2014 earnings from continuing operations of $1.32 per share versus $1.39 in the year-ago quarter. The decrease in earnings was primarily driven by restructuring costs.The reported earnings per share EPS beat the Zacks Consensus Estimate of $1.27.

Income from continuing operations for the quarter stood at $1,213 million versus $1,270 million in the prior-year quarter. Recurring EPS for the quarter increased 10.0% year over year to $1.41 per share.
    
Total revenue for the first quarter edged up 2% year over year to $14,745 million. The reported revenues were above the Zacks Consensus Estimate of $14,683 million. The increase in revenues was driven by organic growth, partially offset by divestiture and adverse foreign exchange.

New equipment orders at Otis were up 9% from the year-earlier quarter driven by growth in China. UTC Climate, Controls & Security equipment orders increased 1% organically. Commercial spares orders increased 9% at UTC Aerospace Systems. However, large commercial engine spares orders were up 11% at Pratt & Whitney.

Segment Results

Otis reported revenues of $2,955 million in the first quarter, up 5.0 % year over year. At the same time, revenues at UTC Climate Controls & Security increased 0.4% year over year to $3,851 million. Pratt & Whitney revenues decreased 2.1 % year over year to $3,329 million in the first quarter. UTC Aerospace systems sales increased to $3,450 million from $3,263 million in the year-ago quarter. However, Sikorsky sales were up 9.0% year over year to $1,361 million in the reported quarter.

Otis reported operating profit of $570 million in the first quarter, down 0.9% year over year. At the same time, operating profit at UTC Climate Controls & Security increased 3.3% year over year to $537 million. Pratt & Whitney's operating profit decreased 4.4% year over year to $388 million in the first quarter. While UTC Aerospace systems operating profit increased to $590 million from $501 million in the year-ago quarter.

However, Sikorsky's operating profit was down 4.4 % year over year to $86 million in the reported quarter. Consolidated segment operating profit in the first quarter stood at $2,098 million versus $2,006 million in the year-ago quarter.

Balance Sheet and Cash Flow

The company continues to maintain a strong cash flow position. As of Mar 31, 2014, cash and cash equivalents were $4.5 billion with long-term debt of $19.7 billion. The company had a debt-to-capital ratio of 37.0%. Cash flow from operations was $1.3 billion, while capital expenditures were $333 million in the quarter. The company repurchased shares worth $335 million during the quarter.

Outlook

Sales in 2014 are expected to be $64 billion. The company increased the lower end of its EPS guidance from $6.55–$6.85 per share to $6.65 to $6.85 per share. Based on additional restructuring projects, the company expects to increase restructuring spending from $300 million to $375 million in 2014. Also, the company continues to expect share repurchase, acquisitions and debt paydown of $1 billion each in 2014.

With sustained order growth momentum in majority of its markets, the company expects organic growth to continue to accelerate in 2014 and beyond.

Share prices dipped in pre-market trading as investors probably expected a more positive outlook from the company.

United Technologies currently has a Zacks Rank #3 (Hold). Other stocks that look promising and are worth a look now include Federal Signal Corp. FSS and Icahn Enterprises, L.P IEP,  each carrying a Zacks Rank #1 (Strong Buy) and Noble Group Ltd. (NOBGY) having a Zacks Rank #2 (Buy).