United Technologies Corp.
) declared that its segment Sikorsky Aircraft Corp. has amended a
contract agreement with the Canadian Government on the Canadian
Maritime Helicopter Program. Ending a long and costly dispute, the
amended contract will allow Canada to replace its maritime fleet
with Sikorsky's CH148 Cyclone helicopters.
Under the original $4.61 billion deal, the delivery of the
helicopters was scheduled to begin in 2012. But the agreement hit a
snag as Sikorsky and Canadian officials clashed over production and
support issues, nearly scrapping the deal.
The revamped contract will pave the way for Canada's Department of
National Defense to begin retiring its aging fleet of Sea King
choppers in 2015, and replace them with 28 maritime patrol
helicopters by Sikorsky.
A senior Canadian Defense Official said that the Cyclones - a
military version of Sikorsky's S-92 choppers - are expected to
start flying limited operational missions from warships in early
2016. However, the Cyclones will be confirmed as fully operational
only in 2018, when Sikorsky delivers a software package that
integrates all elements of the aircraft's mission and warfighting
Financial Effect & Outlook
As a result of the modified contract, Sikorsky's sales will improve
by around $850 million. The financial statements will also record a
charge of $440 million in second-quarter 2014, taking into account
the cumulative effect of progress to date toward completion of the
program, as amended.
United Technologies expects the charges to be offset by one-time
gains over the course of the year and hence, they are expected to
be neutral to 2014 earnings per share (EPS). Therefore, the
conglomerate reiterated its guidance for 2014 EPS in the expected
range of $6.65 to $6.85.
United Technologies currently holds a Zacks Rank #3 (Hold). Some
stocks in the diversified operations industry worth mentioning
Hutchison Whampoa Limited
Noble Group Limited
), each carrying a Zacks Rank #2 (Buy).
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