United Technologies Net Rises as Aerospace Offsets Carrier
United Technologies Corp. (UTX)’s fourth- quarter profit climbed 11 percent as jet production at Boeing Co. (BA) and Airbus (EAD) SAS drove demand for commercial aerospace parts, offsetting slower orders for Carrier air conditioners.
Earnings advanced to $1.47 a share, topping by 1 cent the average of 20 analysts’ estimates compiled by Bloomberg. Sales rose less than 1 percent, below the average prediction.
Sales at the company’s three aerospace units together gained 3.3 percent, helping mitigate a slowdown in other divisions amid a weakening global economy. Homeowners put off purchases for air conditioners and demand for Otis elevators weakened in China, Chief Financial Officer Greg Hayes said on a conference call.
“It’s obviously a slower-growth world,” Hayes said in an interview. “Clearly there was a slowdown in top-line growth.”
United Technologies fell 0.2 percent to $77.65 at the close in New York. The stock has declined 5 percent in 12 months.
Net income rose to $1.33 billion from $1.2 billion, or $1.31, a year earlier, the Hartford, Connecticut-based company said in a statement.
Sales advanced to $15 billion, as rising revenue at Pratt & Whitney helped offset declines at the Carrier and the Fire & Security units. Analysts had estimated sales of $15.1 billion.
The company reiterated its profit projection of $5.80 to $6 a share this year on sales of as much as $60 billion. Analysts have projected profit of $5.72 a share on sales of $62.9 billion.
“It’s a generally favorable, but somewhat clouded, picture,” Richard Whittington, an analyst with Drexel Hamilton LLC in New York, said in a Jan. 23 interview. He has a “buy” rating on the shares. “They have their work cut out for them in the first several quarters here in 2012.”
The company plans to sell assets to help minimize the amount of shares it needs to sell to pay for the purchase of Goodrich Corp. (GR), Hayes said in the interview today.
United Technologies had said it would raise about $4 billion of equity, Hayes said. United Technologies will identify the assets to be sold by March 15 and is working with Standard & Poor’s and Moody’s Investors Service to keep the company’s debt rating intact, he said.
“We’re working hard to reduce the amount of equity we’re going to issue,” he said. “As the CFO of the company I would tell you, what I really hate would be to lose my credit rating with S&P and Moody’s.”
United Technologies is targeting a bigger share of the aerospace market with the $16.5 billion acquisition of Goodrich, the world’s largest maker of aircraft landing gears, that’s scheduled to close in June.
Sales growth excluding acquisitions slowed to 2 percent in the fourth quarter as the global economy weakened, down from 6 percent for all last year, Hayes said.
About three-quarters of Goodrich’s sales are in commercial aerospace, where the industry is booming, and will help offset United Technologies’ sagging defense-related sales, according to Whittington, the Drexel Hamilton analyst. United Technologies makes the Black Hawk helicopter at the Sikorsky unit, which announced in November plans to cut salaried employees by about 3 percent.
Aerospace Sales Rise
Sales at the company’s three aerospace units together rose to $7.39 billion. Otis posted sales growth of 3.3 percent to $3.21 billion. Revenue dropped 1.6 percent at the Fire & Security unit and declined 8.8 percent at Carrier.
Chief Executive Officer Louis Chenevert announced in December a management change and restructuring at the Fire & Security business to combine it with Carrier in an effort to improve the unit’s performance.
Quarterly operating profit rose 7.7 percent from a year ago at Otis to $711 million and and 57 percent to $330 million at Carrier. The Fire & Security unit’s profit dropped 45 percent to $130 million. The aerospace businesses combined had profit of $1.04 billion, a 7.9 percent increase.
The company said restructuring charges lowered earnings per share by 11 cents, while net one-time items added 12 cents.
Operating margin was 15.4 percent, or 0.2 percentage points higher than a year ago, after adjusting for the restructuring costs and one-time items. Without those adjustments, margins were 14.7 percent for the quarter. The company spent $552 million on research and development, an increase of $95 million from a year ago.
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