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United Technologies (UTX) Beats Q3 Earnings, Raises View

By Zacks Investment ResearchStock MarketsOct 24, 2016 10:45PM ET
www.investing.com/analysis/united-technologies-(utx)-beats-q3-earnings,-raises-view-200160596
United Technologies (UTX) Beats Q3 Earnings, Raises View
By Zacks Investment Research   |  Oct 24, 2016 10:45PM ET
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United Technologies Corporation (NYSE:UTX) continued its earnings beat streak, as it reported third-quarter 2016 adjusted income (from continuing operations) of $1.76 per share, comfortably ahead of the Zacks Consensus Estimate of $1.68. The figure also compared favourably with the prior-year quarter tally of $1.67 per share, reflecting growth of 5.4%.

The company’s bottom line benefited from organic sales growth, driven by robust performance of the company’s aerospace businesses.

GAAP net income (from continuing operations) was $1,443 million compared with $1,427 million in the year-ago quarter.

Net sales for third-quarter 2016 improved to $14,354 million from $13,788 million in the year-earlier quarter, but lagged the Zacks Consensus Estimate of $14,400 million. The growth in revenues was primarily attributable to improved performances from all segments, except Otis.

New equipment orders at Otis were up 2% from the year-earlier quarter at constant currency. UTC Climate, Controls & Security equipment orders remained flat. Commercial aerospace aftermarket sales rose 2% at UTC Aerospace Systems and 11% at Pratt & Whitney. Further, commercial and residential HVAC orders in the Americas were up 10% and 11%, respectively.

Segment Results

Despite persistent volatility in foreign currency, revenues of most of the company's segments during the reported quarter were higher than the prior-year quarter.

Revenues at UTC Climate Controls & Security were $4,415 million, up 3.2% from $4,454 million in the year-ago quarter. Pratt & Whitney revenues increased to $3,501 million from $3,234 million in the year-ago quarter. UTC Aerospace Systems’ sales were up 5.5% to $3,646 million from $3,457 million in third-quarter 2015. However, Otis net sales fell 0.8% to $3,018 million.

Operating profit at UTC Climate Controls & Security increased 3.9% year over year to $872 million. Pratt & Whitney’s operating profit decreased to $340 million from $419 million in the year-earlier period, while UTC Aerospace Systems’ operating profit improved 4.9% year over year to $600 million. Operating profit at Otis declined significantly to $584 million in the reported quarter from $642 million in the prior-year quarter.

United Technologies’ consolidated operating profit in the reported quarter was $2,251 million, down from $2,302 million in the prior-year period. Operating profit margin came in at 15.9% in third-quarter 2016, down from 17.2% in the year-earlier quarter.

Balance Sheet and Cash Flow

As of Sep 30, 2016, cash and cash equivalents were $7,107 million and long-term debt was $20,190 million at quarter end. The company maintained its debt-to-capital ratio at 42%.

Cash flow from operations was $1,951 million for the quarter compared with $1,021 million in the year-ago quarter. Capital expenditures were $394 million in the reported quarter, marginally up from $390 million in third-quarter 2015. Free cash flow for the quarter came in at $1,557 million.

UTD TECHS CORP Price, Consensus and EPS Surprise

Guidance Tweaked

Incorporating its improved expectations for organic sales growth in the near future, United Technologies revised its guidance for 2016. For 2016, the company now expects adjusted earnings to be in the range of $6.55–$6.60 per share (prior guidance: $6.45 to $6.60) on revenues of $57–$58 billion.

The company reaffirmed its acquisition expectation of $1–$2 billion and free cash flow guidance in the range of 90–100%. It also plans to repurchase shares worth $3 billion in 2016. United Technologies stated that its plan to return $22 billion in cash to shareholders from 2015 through 2017 remains on track.

United Technologies currently has a Zacks Rank #4 (Sell).

Stocks to Consider

Some better-ranked stocks in the same space include Leucadia National Corporation (NYSE:LUK) , Danaher Corp. (NYSE:DHR) and Raven Industries Inc. (NASDAQ:RAVN) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Leucadia National’s earnings are projected to grow at a rate of 18% over the next five years, far ahead of its peers.

Danaher has registered a remarkable positive average surprise of 6.1% over the four trailing quarters, beating estimates thrice.

Raven also has delivered a positive average surprise of 63.2% over the trailing four quarters.

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Zacks Investment Research
United Technologies (UTX) Beats Q3 Earnings, Raises View
 

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United Technologies (UTX) Beats Q3 Earnings, Raises View

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