UTX Earnings Beat in 1Q, Revs Lags

Zacks

United Technologies Corp (UTX) - a diversified company providing high technology products - reported first quarter 2013 earnings (including one-time items and restructuring costs) of $1.39 per share versus $1.31 in the year-ago quarter. The reported earnings beat the Zacks Consensus Estimate of $1.30. Before these one time items EPS increased 16% year over year. The increase in earnings was driven by higher revenues in both Pratt & Whitney and UTC Aerospace systems businesses.

Total revenue for the first quarter 2013 grew 16% year over year to $14.4 billion, but missed the Zacks Consensus Estimate of $14.8 billion. The increase in revenues was driven by net acquisitions.

Organic sales were down 2.0% year over year, driven by ongoing weakness in both Europe and the commercial aerospace aftermarket and the defense cuts impact at Sikorsky

New equipment orders at Otis were up 24% over the year-earlier quarter. UTC Climate, Controls & Security equipment orders was up 5% organically. Organically, commercial spares orders decreased 28% at Pratt & Whitney. On a pro-forma basis, commercial spares orders were up 2% at UTC Aerospace Systems. However, large commercial engine spares orders were up 14% at Pratt & Whitney

Segment Results

Otis reported revenues of $2,814 million in first quarter, up 1.6% year over year. At the same time, revenue at UTC Climate Controls & Security declined 6.7% year over year to $3,837 million. Pratt & Whitney revenue increased 11.5% year over year to $3,402 million in first quarter while UTC Aerospace systems sales  stood at $3,263 million compared to $1,236 million in the year ago quarter. Additionally, Sikorsky sales were down 7.2% year over year to $1,249 million in the first quarter.

Segment operating profit in the first quarter increased 14% year over year to $2092 million.

Balance Sheet and Cash Flow

The company continues to maintain a strong cash flow position. As of Mar, 31, 2013, cash and cash equivalents were $4.8 billion with long-term debt of $21.6 billion. The company had a debt to capital ratio of 45.0%. Cash flow from operations was $1.4 billion while capital expenditures were $295 million for the reported quarter. The company repurchased shares worth $335 million in the reported quarter.

Outlook

Concurrent with the strong quarterly results, sales in 2013 are expected to be in the range of $64 billion to $65 billion, while earnings are expected to be in the range of $5.85 to $6.15 per share. The company expects share repurchase and acquisitions of $1 billion each in 2013.

Moving ahead, United Technologies plans to focus on deleveraging and improving its balance sheet. The company intends to pay down $2 billion of debt in 2013 due to its strong cash position. Additionally, Goodrich and IAE acquisitions are expected to create new opportunities for growth to the company in the long term.

However, United Technologies currently has a Zacks Rank #3 (Hold). Other stocks that look promising and are worth considering now are Honeywell International Inc (HON), Crane Co (CR) and Macquarie Infrastructure Company LLC (MIC), each carrying a Zacks Rank #2 (Buy).
 

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