United Technologies Tumbles Most Since 2011 on Forecast Cut

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United Technologies Cuts Its 2015 Profit Forecast

United Technologies Corp., poised to sell the Sikorsky helicopter business, plunged the most in almost four years after cutting its 2015 profit forecast amid weak demand across other units.

UTC Aerospace Systems’ aftermarket aircraft parts and Otis Elevator’s operations outside the U.S. are both faring worse than expected, Chief Executive Officer Gregory Hayes said Tuesday. The new earnings outlook was the second such pullback since June and included a lower sales projection.

“We don’t like doing this,” Hayes said in a telephone interview. “It’s disappointing, but it’s just the reality that we’re facing.”

The divisions under pressure are pillars of Hayes’s strategy for Hartford, Connecticut-based United Technologies, which is selling Sikorsky to Lockheed Martin Corp. He’s focusing on UTC Aerospace and Pratt & Whitney jet engines in aviation and Carrier air conditioners and Otis in building services, but faces currency headwinds and weaker foreign markets.

United Technologies fell 7 percent to $102.71 at the close in New York -- its biggest one-day slump since September 2011. It was the deepest decline among the 30 stocks in the Dow Jones Industrial Average.

Excluding Sikorsky, earnings this year will be $6.15 to $6.30 a share, down from $6.35 to $6.55, United Technologies said as it reported second-quarter earnings. Full-year revenue of $57 billion to $58 billion will trail a prior range of $58 billion to $59 billion.

‘Anticipate Weakness’

The revised forecast suggests the company “hasn’t been able to offset or anticipate weakness in several end markets,” Jason Gursky, a Citigroup Inc. analyst, said in a note to clients.

United Technologies trimmed its 2015 earnings forecast last month, too, blaming separation costs for Sikorsky and weakness in the oil and gas markets. Hayes said conditions deteriorated faster than the company projected.

“Our assumptions around the aftermarket provisioning, especially on our Aerospace Systems business, is a lot slower than what we expected,” Hayes said. “And the recovery in Europe is still in the future.”

He said the company is accelerating restructuring efforts to reduce costs across its units.

Sikorsky Deal

United Technologies announced the $9 billion Sikorsky deal on Monday, saying it expects to close by the first quarter of 2016. The board also approved a 75 million-share buyback plan to offset the earnings impact of the transaction, which capped a review begun after Hayes was promoted to CEO in November.

While the Sikorsky sale still requires U.S. Defense Department approval, Hayes said “at the end of the day it’ll get done and I don’t see any big issues.”

Divesting Sikorsky could pave the way for acquisitions. Hayes said he sees “more opportunity than we did earlier this year” for deals, and he is evaluating targets valued at $500 million to $5 billion.

“We’re done shrinking UTC,” Hayes said. “We’ve done the portfolio review at the top level, we like the hand that we have today and we want to grow off of that base business.”

Second-quarter orders fell 10 percent in China in the Otis unit as net sales dropped 8 percent to $3.1 billion. The company pared the profit forecast for Otis and the aerospace division. Quarterly revenue in the latter unit was unchanged.

Even as quarterly sales dropped 5 percent to $16.3 billion, an improving U.S. market helped blunt some of the drag from slowing economies overseas, Hayes said.

“You’ve got the dynamic of a very strong U.S. recovery, stronger than what we had expected, and a much weaker than expected China,” he said. “Europe is just kind of muddling along.”

Second-quarter per-share profit of $1.73 topped the $1.72 average of 14 estimates compiled by Bloomberg. Foreign currency exchange had an unfavorable impact of 6 cents a share, according to the company, which says non-U.S. sales make up about two-thirds of annual revenue.

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