United Technologies Cuts Forecast on Surprise Dollar GainRichard Clough
A surging U.S. dollar against the euro and other currencies surprised United Technologies Corp. and forced a cut in the company’s annual profit forecast just weeks after it was given to investors.
“There wasn’t much choice here but to take the full year down,” Chief Executive Officer Gregory Hayes said Monday in an interview.
The pullback reflected United Technologies’ dependence on markets outside the U.S. for sales of products as diverse as Pratt & Whitney jet engines, Sikorsky helicopters and Otis elevators. Hayes said the Hartford, Connecticut-based company gets 62 percent of its revenue from abroad.
Cost reductions at the corporate level will help blunt the currency headwinds, said Hayes, who became CEO in November when his predecessor, Louis Chenevert, abruptly stepped down. Pension expense also weighed on 2015 projections, according to a statement.
“There is nothing different about the operational outlook of the company,” Chief Financial Officer Akhil Johri said in the interview.
Annual earnings will be in a range of $6.85 to $7.05 a share, compared with the outlook for $7 to $7.20 given in December, United Technologies said. The new sales forecast is $65 billion to $66 billion, instead of $66 billion to $67 billion.
The news added to pressure on United Technologies’ shares. The stock slid 1.7 percent to $116.72 at 7:42 p.m. in New York, extending a 1 percent drop during regular trading that was the second-most among stocks on the Dow Jones Industrial Average. James Corridore, a Standard & Poor’s Capital IQ analyst in New York, cut his rating to hold from buy.
Hayes said United Technologies is now modeling for a euro at $1.10, after projecting the European currency at $1.25 in issuing full-year earnings expectations last month. The euro climbed 0.3 percent to $1.1238 at 5 p.m. in New York after sliding to $1.1098, the weakest level since September 2003.
The revised profit forecast follows a tumultuous end to 2014 that included Chenevert’s exit after six years on the job. Hayes, who was promoted from CFO, has made several more management changes as he looks to jump-start growth.
Fourth-quarter earnings from continuing operations were $1.62 a share, matching the average of 20 analysts’ estimates compiled by Bloomberg. United Technologies moved up the report to Monday afternoon instead of Tuesday morning as a blizzard began walloping the Northeast U.S.
Sales rose 1 percent to $17 billion, narrowly missing analysts’ estimates, led by a 10 percent gain for Sikorsky. Revenue dropped 1.6 percent for Pratt, which is preparing to boost production for a major new engine program to power airliners such as Airbus Group NV’s A320neo.
Chenevert reshaped United Technologies in recent years around aerospace and building services. Following the CEO change, Hayes said he would review the company’s business lines and would consider potentially large acquisitions.
This month, Hayes streamlined the company’s structure by eliminating the UTC Propulsion & Aerospace Systems organization that oversaw Pratt and the company’s aircraft-parts business. On a conference call with analysts, Hayes said the move was one of several designed to reduce corporate overhead.
“We’re going to continue on this path of cost reduction,” he said.