What To Expect From United Technologies' (UTX) Q1 Earnings?

United Technologies Corporation (NYSE:UTX) is scheduled to report first-quarter 2018 results on Apr 24, before the opening bell. The company is likely to report higher revenues in the impending quarterly results, owing to overall favorable macroeconomic environment and strong demand.

United Technologies has a decent earnings surprise history, having trumped estimates in the trailing four quarters for an average beat of 4.1%. In the last reported quarter, the company pulled off a positive surprise of 2.6%.

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

Factors to Consider

Revenues of the company are largely affected by spending in the U.S. military and commercial aviation industries. An increase in demand for the company’s products in these industries is expected to favorably impact its financial performance, which will be reflected in the upcoming results.

The Zacks Consensus Estimate for the first quarter of 2018 revenues is pegged at $14,537 million, higher than reported revenues of $13,815 million in the prior-year quarter. Revenues across Otis, Pratt & Whitney and Aerospace Systems segments are expected to increase year over year to $2,875 million, $4,280 million and $3,642 million from $2,804 million, $3,758 million and $3,611 million, respectively. UTC Climate, Controls & Security revenues are expected to come in at $4,087 million, up from $3,892 million in the year-ago quarter.

In September 2017, United Technologies announced its plans to acquire Rockwell Collins (NYSE:COL), an Iowa-based avionics firm. Post the acquisition, United Technologies is expected to emerge as one of the world’s largest aircraft equipment manufacturers. The acquisition, slated to be completed by the third quarter of 2018, will provide a huge competitive advantage to the company and increase its bargaining power. The resultant operating synergies and lower operating costs will help it create complementary products that will help it serve evolving global customer needs.

The merger is expected to be a huge boost to the company’s revenues and adjusted earnings per share after the first year of combined operations with synergies worth more than $500 million. Although the transaction will not have any direct impact on earnings in the quarter, it is likely to attract similar profitable deals for the company that will augment overall revenues in the quarter.

Separately, the strong aftermarket business that sells spare parts and offers related services to keep the primary products running is likely to record a healthy growth momentum with uptick in the economy. Furthermore, continued focus on four key priorities to fuel its growth momentum, namely flawless execution, innovation for growth, structural cost reduction and disciplined capital allocation is likely to translate to improved performance in the quarter.

United Technologies Corporation Price, Consensus and EPS Surprise

However, the company registered significant margin contraction in fourth-quarter 2017, as rise in operating expenses overshadowed top-line growth. If the operating expenses continue to reflect upward momentum, margins for the quarter under review will be pressurized.

Earnings Whispers

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

Zacks ESP: The company’s Earnings ESP is -0.75%, as the Most Accurate estimate is $1.50 and the Zacks Consensus Estimate is pegged at $1.51. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

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

Stocks That Warrant a Look

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

Allegheny Technologies Incorporated (NYSE:ATI) has an Earnings ESP of +9.38% and a Zacks Rank of 1. The company is expected to release quarterly numbers around Apr 24. You can see the complete list of today’s Zacks #1 Rank stocks here.

Century Aluminum Company (NASDAQ:CENX) , with Earnings ESP of +29.41% and a Zacks Rank of 1, is slated to report results on Apr 24.

Watsco, Inc. (NYSE:WSO) has an Earnings ESP of +3.96% and a Zacks Rank of 2. The company is likely to release earnings on Apr 24.

Wall Street’s Next Amazon (NASDAQ:AMZN)

Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.

Click for details >>