United Technologies Corp. (UTX)’s twin bets on aviation and commercial building systems are paying off.
The maker of aircraft parts and Otis elevators raised the lower end of its 2014 earnings forecast today after beating analysts’ first-quarter profit estimates. Excluding divestitures and foreign exchange, quarterly sales rose 5 percent, Hartford, Connecticut-based United Technologies said.
Chief Executive Officer Louis Chenevert has transformed United Technologies with the 2012 purchase of aerospace supplier Goodrich Corp., asset sales and the combination of the elevator, climate-control and fire and security divisions into one unit. The company reaped savings in the $16.5 billion Goodrich deal and sees more from the blended construction businesses.
“The sales environment is looking a little bit better and the cost cutting is bearing fruit,” said Christian Mayes, an analyst with Edward Jones & Co. in Des Peres, Missouri, who rates the stock as buy. “Investors got what they were looking for: the raised low-end of the guidance and the earnings beat.”
Full-year profit will be $6.65 to $6.85 a share, a 10-cent boost to the bottom of that range, United Technologies said. Earnings from continuing operations of $1.32 a share topped the $1.27 average of 20 estimates compiled by Bloomberg.
“After barely growing organically for roughly two years, organic growth has now been 4 to 5 percent for two consecutive quarters,” Joseph Nadol, a JPMorgan Chase & Co. analyst in New York, said today in a note to investors. He rates the stock as overweight.
The shares rose 0.8 percent to $119.19 at the close in New York. That extended the stock’s year-to-date gain to 4.7 percent, topping the 1.7 percent advance in the Standard & Poor’s 500 Index.
Net quarterly sales increased 2.4 percent to $14.75 billion, buoyed by gains in orders for elevators and aircraft equipment. United Technologies makes aviation components including landing gear and electronics as well as Pratt & Whitney jet engines.
“We’re feeling pretty good about the economies,” Chief Financial Officer Greg Hayes said today in a telephone interview. “Europe seems to be coming out of the doldrums and the U.S. is performing about as expected.”
Net income fell 4.2 percent to $1.21 billion. Restructuring costs shaved 9 cents from per-share earnings. United Technologies said it plans to spend $375 million on restructuring projects to boost cost savings, up from a projected $300 million.
Sales at Otis rose 5 percent to $2.96 billion and climbed 5.7 percent at the aerospace systems unit. Revenue at helicopter maker Sikorsky and the commercial buildings unit also increased while falling at engine maker Pratt & Whitney, which sold its power systems business last year.
Defense sales will be little changed this year as a drop of as much as 5 percent in the U.S. is made up by higher international sales, Hayes said. The company is still in negotiations with the Canadian government to supply helicopters and doesn’t expect shipments to begin until the second half of this year, Hayes said.
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