UTC Q1 2016 Earnings Review: Results Beat Consensus Estimates; Revenue And Earnings Up Year-Over-Year

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United Technologies

United Technologies (NYSE: UTX) released results for Q1 2016 recently. In terms of net adjusted income, the company posted EPS of $1.47, beating the consensus analyst estimate by a comfortable 8 cents. Revenues came in at $13.5 billion and was primarily driven by 2% organic growth in the quarter. Volatile foreign currency headwinds led to adverse impacts on the revenues of most segments. However, Pratt & Whitney outperformed this quarter with plants in Connecticut and Florida reporting strongest first quarter output in military and commercial jet engines in more than 10 years.

Despite a slow growing economy, the company reaffirmed its EPS guidance range of $6.30 to $6.60 for 2016.

Highlights from the quarter:

  • The company has decided to repurchase $3 billion shares this year in addition to an accelerated repurchase program of $6 billion announced previously. UTC also increased its dividend to 66 cents a share earlier this week.
  • UTC’s quarterly results were negatively affected by inventory buildup in advance of an increase in ramping aerospace programs. This includes large expected orders at Pratt & Whitney for military and commercial aircraft engines.
  • A payment of $237 million to the Canadian Government related to Pratt & Whitney Canada’s research and development investment pact also had a negative impact on the results this time around. The deal calls for Pratt Canada to spend $1 billion on its Canadian operations over four years, in return for tax incentives and other aid from Canadian government agencies.
  • Otis equipment orders increased by 1% year over year despite a slow growing economy. However, equipment orders at UTC Climate, Controls & Security decreased by 8 percent. This was primarily due to a decline in the Carrier’s refrigeration business.
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Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment / ask questions on the comments section
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis of UTC

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