United Technologies Corp. (UTX: 67.88 +0.34 +0.50%) recorded another strong quarterly performance, reporting earnings per share from continuing operations of $1.32, above the Zacks Consensus Estimate of $1.16. The year-over-year increase in the company’s earnings and an improved margin was led by an increase in revenue and cost reduction efforts of the company.
Revenue
Total revenues in the quarter increased by 5% year over year to $13.9 billion, including organic growth of 4% and 1% from acquisitions. The company’s revenue increased in most of its segments except Otis and Hamilton Sundstrand, where revenues declined by 3.9% and 1%, respectively. The company’s highest revenue generating segment, Pratt & Whitney, reported an increase of 6%. Sikorsky revenues increased by 21.7% compared to the prior-year period.
Though the revenues in Otis and Hamilton Sundstrand declined during the quarter, new equipment orders in the segments increased by 12% (including favorable foreign exchange of 1%) and 7%, respectively. Orders for commercial HVAC increased by 6% (including favorable foreign exchange 1%) and for Carrier Transicold were up 39% organically. At Pratt & Whitney, demand for commercial spares for large engine increased by 8% year over year.
Margin
Margin
Segment operating margin increased by 160 basis points to 14.6% in comparison with the prior-year period. Adjusted segment operating margin, excluding restructuring and one-time items, increased 80 basis points to 15.7%.
Balance Sheet
Balance Sheet
Cash generation remains strong, driven by efficient deployment of working capital and control over capital expenditures. Cash and equivalents stood at $5.0 billion with long-term debt at $10 billion and shareowner’s equity at $19.9 billion.
The company has already repurchased $1.1 billion worth of shares out of $1.5 billion shares it had planned to repurchase. The company now targets to repurchase approximately $2.0 billion shares during the year. Total spending for acquisition is expected to be about $3 billion for the year, with $2.4 billion having already been made.
Outlook
The company’s results for the quarter are quite impressive, supported by an improvement in its end-market environment. A solid performance delivered in the first half of the 2010 led the company to increase its EPS guidance for the year to $4.60 to $4.70 from $4.50 to $4.65, reflecting a year-over-year increase of 12% to 14%. Revenues for the year are expected to be $54 billion.
The company has strong market positions in aerospace/defense and has a global infrastructure with a portfolio that includes Carrier, Otis, Hamilton Sundstrand, Pratt & Whitney, Sikorsky and Fire & Security. However, the financial performance of the company is dependent on the conditions of the construction and aerospace industries. The company is highly dependent on the US government’s budgetary allocation for defense. Its business may also be impacted by government contracting risks.
The major competitors of United Technologies are The Boeing Co. (BA: 64.31+0.43 +0.67%), BorgWarner Inc. (BWA: 41.34 -0.89 -2.11%), General Electric Co. (GE: 14.9875 +0.0475 +0.32%), Honeywell International Inc. (HON: 41.81+0.61 +1.48%). Recently, General Electric also declared its second quarter of 2010 results and reported earnings per share from continuing operations of 30 cents, exceeding the Zacks Consensus Estimate of 27 cents. Total revenues for GE declined by 4% compared to the prior-year period and total orders increased by 8%.
United Technologies Corp. is a global provider of high technology products and services to the building systems and aerospace industries. The company’s growth has been attributed to acquisitions and the internal development of existing businesses.| Analysts' Targets | |
| Sterne, Agee & Leach | $82 |
| Mkt Perform | |
| Tuesday, April 13, 2010 | |
| Jefferies & Co. | $82 |
| Accumulate | |
| Monday, March 15, 2010 | |
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