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United Technologies Beats Q3 Earnings, Reaffirms Outlook

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United Technologies CorporationUTX reported third-quarter 2015 net income of $1,426 million or $1.61 per share, down from $1,755 million or $1.93 in the year-ago quarter. The decrease in net income was due to a decline in revenues.

Excluding one-time items, recurring earnings for the quarter were $1.67 per share, down 2% year over year. However, the figure surpassed the Zacks Consensus Estimate of $1.54.

Total revenue for the third quarter decreased 6.0% year over year to $13,788 million. The decrease in revenues was owing to the impact of adverse foreign exchange and a decline in organic sales. Revenues also missed the Zacks Consensus Estimate of $14,593 million.

New equipment orders at Otis were up 2% from the year-earlier quarter. UTC Climate, Controls & Security equipment orders decreased 2%. Commercial aerospace aftermarket sales rose 1% at UTC Aerospace Systems and increased 8% at Pratt & Whitney.

Segment Results

Otis recorded revenues of $3,043 million in the reported quarter, down 8.5% year over year. Revenues at UTC Climate Controls & Security stood at $4,279 million versus $4,351 million in the year-ago quarter. Pratt & Whitney revenues decreased 9.2% to $3,234 million in the third quarter. UTC Aerospace systems' sales fell 2.2% to $3,457 million.

Operating profit of Otis declined to $642 million in the reported quarter from $703 million in the prior-year quarter. Operating profit at UTC Climate Controls & Security stood at $771 million versus $807 million in the year-ago period. Pratt & Whitney's operating profit decreased 33.8% year over year to $419 million in the reported quarter, while UTC Aerospace systems' operating profit dropped to $572 million from $575 million in the year-ago quarter.

Consolidated segment operating profit in the reported quarter stood at $2,302 million versus $2,612 million in the prior-year period. Segment operating margin stood at 17.2% versus 18.4% in the year-earlier quarter.

Balance Sheet and Cash Flow

As of Sep 30, 2015, cash and cash equivalents were $5,477 million versus $5,229 million as of Dec, 31, 2014. Long-term debt stood at $19,428 million as of Sep 30, 2015 versus $17,867 million as of Dec 31, 2014. The company had a debt-to-capital ratio of 41.0%.

Cash flow from operations aggregated $1,021 million for the quarter compared with $2,027 million in the year-ago quarter. Capital expenditures were $390 million in the reported quarter.

Others

United Technologies reached an agreement to sell its Sikorsky Aircraft business to Lockheed Martin Corp. for $9 billion in cash, subject to regulatory approvals. This previously announced sale of its Sikorsky unit is expected to close in the fourth quarter of 2015. Also, the company authorized a new $12 billion share repurchase program, including the $6 billion share repurchase, using the net proceeds from the Sikorsky sale. The company expects to complete $16 billion of share repurchases through 2017.

Outlook

United Technologies reaffirmed its full-year 2015 guidance. Earnings from continuing operations per share are expected in the range of $6.15-$6.30. Sales from continuing operations are anticipated in the range of $57-$58 billion. The company expects acquisitions of $1 billion and cash flow from operations less capital expenditures in the range of 90%-100% of net income in 2015.

United Technologies currently has a Zacks Rank #3 (Hold). Stocks that look promising in the industry include Compass Diversified Holdings CODI , Danaher Corp. DHR , and Graham Corporation GHM , each carrying a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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