United Technologies (UTX) Q1 Earnings: What's In Store?

Diversified conglomerate, United Technologies Corporation (NYSE:UTX) (NYSE:T) is scheduled to report first-quarter 2017 results before the opening bell on Apr 26. In the last reported quarter, the company’s earnings were in line with the Zacks Consensus Estimate of $1.56. On a trailing four-quarter basis, United Technologies boasts an average positive earnings surprise of 5.21%, beating estimates on three occasions.

Let’s see how things are shaping up for this announcement.

Key Factors in the First Quarter

During the quarter, Carrier, an operating unit of United Technologies collaborated with AT&T Inc. (NYSE:T) to incorporated the latter’s wireless connectivity on commercial HVAC (heating, ventilation and air conditioning) equipment in its Smart Service solution. This collaboration helps enhance Carriers’ services to its customers. The deal is likely to have a positive impact on the company’s revenues in the quarter to be reported.

On Mar 28, Automated Logic Corporation, part of UTC Climate, Controls & Security, a unit of United Technologies collaborated with Lucid, to create the next generation of EnergyReports energy analysis and reporting tool. Per the deal, the new EnergyReports tool combines building data from ALC's powerful WebCTRL building automation system with Lucid's industry-leading BuildingOS cloud-based energy management platform. This collaboration will enable the company provide better solutions to its customers, which will help boost revenues.

During the quarter, the company continued to secure various deals across all of its segments, which will have a positive impact on its revenues.

With over 8,000 employees, United Technologies has a considerable presence in the U.K. Consequently, the company is susceptible to high operating risks following the Brexit referendum. Fluctuations in foreign currency exchange rates also affect its net investment in foreign subsidiaries and may cause instability in cash flows related to foreign denominated transactions. These undermine its long-term growth to some extent.

United Technologies relies on suppliers, including third-party contract manufacturing and commodity markets to secure raw materials, parts, components and sub-systems. This exposes the company to market price volatility and availability risks. A disruption in deliveries from suppliers, supplier capacity constraints, contract manufacturer production disruptions, price changes, or decreased availability of raw materials or commodities, could have an adverse effect on its ability to meet delivery schedules and increases operating costs. These headwinds look all the more potent with the strengthening of the U.S. dollar.

Earnings Whispers

Our proven model does not conclusively show that United Technologies will beat earnings this time. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. This is not the case here as you will see below.

Zacks ESP: Earnings ESP represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate. United Technologies Earnings ESP is 0.00% as the Most Accurate estimate of $1.39 is in line with the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: United Technologies’ Zacks Rank #3 when combined with 0.00% ESP makes surprise prediction uncertain.

We caution against stocks with a Zacks Rank #4 or #5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are a couple companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

The Coca-Cola Company (NYSE:KO) has an Earnings ESP of + 2.27% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Lockheed Martin (NYSE:LMT) Corporation (NYSE:T) has an Earnings ESP of +2.90% and a Zacks Rank #2.

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