United Technologies Gains Most in Dow as Forecast Is Raised
United Technologies Corp. (UTX) rose the most among Dow Jones Industrial Average (INDU) stocks after boosting the lower end of its 2013 profit forecast and reporting second-quarter earnings that beat analysts’ estimates.
The stock climbed 2.9 percent following today’s revised projection that earnings per share may climb 12 percent to 15 percent this year to $6.00 to $6.15. The Hartford, Connecticut-based company had previously called for an increase of a minimum of 9.3 percent to $5.85 a share.
United Technologies is benefiting from a surge in demand for replacement parts for its Pratt & Whitney engines as the airline industry is poised to boost profitability and build up its inventory of spares. Chief Executive Officer Louis Chenevert’s overhaul of the company to focus on aviation is increasing profit as the $16.5 billion purchase of Goodrich Corp. helps win business from customers such as Embraer (EMBR3) SA.
“The growth in orders is fuel for the coming quarters,” Chenevert said in a telephone interview after the results were announced. “It gives me high confidence for what’s coming in the second half.”
Net income rose to $1.56 billion, or $1.70 a share in the second quarter, beating the $1.58 average of 21 estimates compiled by Bloomberg. Profit a year earlier was $1.33 billion, or $1.62 a share.
Operating income at the aerospace systems unit, which includes Goodrich, more than doubled from a year earlier to $499 million. Profit at the Pratt & Whitney unit, which makes engines for commercial and military aircraft, climbed 33 percent to $567 million.
“This was a better than expected quarterly performance,” Robert Stallard, an analyst with Royal Bank of Canada, wrote in a note to clients today. “We’re encouraged by the improving order trends, particularly in the aftermarket.”
Stallard has a buy rating on the shares.
Orders for Pratt & Whitney commercial-aircraft engine spare parts climbed 65 percent in the quarter, compared with a 14 percent gain in the first three months of the year. At United Technologies Aerospace Systems, spares orders advanced 4 percent.
“A comeback in spare parts for planes bodes well for these guys because it’s a really profitable business,” Christian Mayes, an analyst with Edward Jones & Co., said in a telephone interview. “Demand has been pent up for so long with airlines holding back on restocking, but they just couldn’t hold back anymore. It was really overdue for a bounce back.”
Mayes is based in St. Louis and has a buy rating on the stock.
The company will spend $450 million this year to streamline operations, including closing some facilities. That’s a 29 percent increase from a previous forecast for $350 million in restructuring costs.
United Technologies’ revenue in the second quarter increased 16 percent to $16 billion, trailing the $16.4 billion average estimate of analysts surveyed by Bloomberg. The company forecast full-year sales of $64 billion, matching the lower end of its previous outlook.
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