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United Technologies Beats Estimates - Analyst Blog

Posted: 1/23/2013 11:27:00 AM
Referenced Stocks: ITT;UTX

United Technologies Corp . ( UTX ), a leading provider of high-technology products, reported fourth quarter 2012 earnings of $1.04 per share versus $1.42 in the year-ago quarter. The reported earnings beat the Zacks Consensus Estimate of $1.02. For 2012, EPS of $5.35 was essentially flat compared to  the prior year, but ahead of the Zacks Consensus Estimate of $5.32.

Total revenue for the fourth quarter grew 14% year over year to $16.4 billion, but marginally missed the Zacks Consensus Estimate of $16.5 billion. Organic sales growth was flat in the quarter and foreign currency translation had a negative impact of 1 point.

However, acquisitions contributed 15 points growth to the top line. For 2012, total revenue stood at $57.7 billion, up 4% year over year, including the effects of net acquisitions (6 points) and negative foreign currency translation (2 points).

New equipment orders at Otis were up 12% over the year-earlier quarter. North American Residential HVAC new equipment orders at the company's UTC Climate, Controls & Security was up 20%. Commercial spares orders at Pratt & Whitney's large engine business dipped 8%, while that of UTC Aerospace Systems declined 4%.  However, large commercial engine spares orders were up 46 % at Pratt & Whitney.

Segment Results

Otis reported revenues of $3,205 million in fourth quarter down 0.18% year over year. At the same time, revenue at UTC Climate Controls & Security declined 6% year over year to $4,147 million. Pratt & Whitney revenue increased 10.5% year over year to $3891 million in fourth quarter while  UTC Aerospace systems sales went up 60% year over year to $3174 million. Additionally, Sikorsky sales were up 3% year over year to $2176 million in fourth quarter.

Balance Sheet and Cash Flow

The company continues to maintain a strong cash flow position.  As of Dec, 30, 2012, 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 46.0%. Cash flow from operations was $6.6 billion, while capital expenditures were $1.4 billion for 2012.  

In order to come up with innovative products amid a challenging macroeconomic environment, United Technologies invested $2.4 billion in developing game-changing technologies and nearly $600 million on restructuring initiatives.


Cocurrent with the strong quarterly and full-year results and based on its improved order trends, 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.

United Technologies repositioned its portfolio in fiscal 2012 with the completion of the Goodrich acquisition and IAE transactions and the divestiture of several non-strategic assets with its main focus on the core markets.

However, the company needs to be wary of its competitors, which include formidable names such as ITT Corporation (ITT ) and Federal Signal Corp ( FSS ).

United Technologies currently has a Zacks Rank #3 (Hold). One of its competitors, Tyco International Ltd ( TYC ) carries a Zacks Rank #1 (Strong Buy).

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