United Technologies (UTX) Q4 Earnings Match, Affirms View
United Technologies CorporationUTX reported fourth-quarter 2016 adjusted earnings (from continuing operations) of $1.56 per share, in line with the Zacks Consensus Estimate.
GAAP earnings (from continuing operations) were $1.26 per share as against a loss of 30 cents in the year-ago quarter.
The company's bottom line benefited from organic sales growth, driven by robust performance of the company's Climate, Controls & Security businesses.
Adjusted net sales for the fourth quarter were $14,659 million compared with $14,652 million in the year-earlier quarter. Revenues beat the Zacks Consensus Estimate of $14,620 million. The rise was primarily attributable to improved performance in majority of its segments, except Otis and Aerospace.
For full-year 2016, the company reported adjusted earnings (from continuing operations) of $6.61 per share compared with prior-year earnings of $6.30. Adjusted revenues for 2016 were $57,428 million compared with $56,450 million in the prior year. The improvement in revenues was primarily attributed to the company's Pratt & Whitney and Aerospace segment.
Despite persistent volatility in foreign currency, revenues from most of the company's segments during the reported quarter were higher than the prior-year period.
Adjusted revenues at UTC Climate Controls & Security were $4,249 million, up 3.1% from $4,122 million in the year-ago quarter. Pratt & Whitney's revenues increased to $3,992 million from $3,981million in the year-ago quarter. However, UTC Aerospace Systems' sales were down 1.9% to $3,598 million from $3,667 million in the fourth quarter. Otis' revenues were $3,063 million compared with $3,094 million in the prior-year quarter.
Adjusted operating profit at UTC Climate Controls & Security increased year over year to $680 million from $659 million in the year-ago quarter. Pratt & Whitney's operating profit decreased to $470 million from $551 million in the year-earlier period, while UTC Aerospace Systems' operating profit improved 4.4% year over year to $595 million. Operating profit at Otis declined to $534 million in the reported quarter from $561 million in the prior-year quarter.
United Technologies' adjusted consolidated operating profit in the reported quarter was $2,160 million, up from $2,155 million in the prior-year period. Operating profit margin came in at 15.3% in the quarter, down from 15.7% in the year-earlier period.
United Technologies Corporation Price, Consensus and EPS Surprise
Balance Sheet and Cash Flow
As of Dec 31, 2016, cash and cash equivalents were $7,157 million compared with $7,075 million in the year ago period. Long-term debt was $21,697 million compared with $19,320 million. The company maintained its debt-to-capital ratio at 45%.
Cash flow from operations was $6,412 million compared with $6,755 in the year ago period, while capital expenditures were $1.7 billion. Free cash flow for the year came in at $4.7 billion.
Incorporating its improved expectations for organic sales growth in the near future, United Technologies affirmed its guidance for 2017. The company expects adjusted earnings in the range of $6.30 to $6.60 per share on revenues of $57.5 to $59 billion.
The company reaffirmed its acquisition expectations of $1-$2 billion and free cash flow guidance in the range of 90-100% of net income. It also plans to repurchase shares worth $3.5 billion in 2017.
United Technologies currently has a Zacks Rank #3 (Hold).
Stocks to Consider
Some better-ranked stocks in the same space include Hitachi, Ltd. HTHIY , FactSet Research Systems Inc. FDS and Barloworld Ltd. BRRAY . All three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here
Hitachi has a long-term earnings growth expectation of 13% and is currently trading at a forward P/E of 14.3x.
Barloworld has a long-term earnings growth expectation of 18.70% and is currently trading at a forward P/E of 11.04x.
FactSet has a long-term earnings growth expectation of 10.7% and is currently trading at a forward P/E of 23.7x.
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