United Technologies Q2 Earnings: Positive Momentum Continues To Drive Revenue And Earnings

by Trefis Team
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United Technologies (NYSE: UTX) reported a solid quarter this time around. The company managed to beat the revenue and earnings consensus estimates by a comfortable margin. Earnings from continuing operations were recorded at $1.85 a share, beating the analyst consensus by 7 cents, while revenues came in at $15.28 billion, outpacing the expected $15.18 billion. The top line was driven by positive performances across all segments except at Aerospace. Given the commendable performance thus far, management has decided to raise the bottom end of the guidance for the full year. The company now expects revenues to come in around $58.5-$59.5 billion, up from $57.5-$59.5 billion, while earnings come in around $6.45-$6.60, up from the previous range of $6.30-$6.60.

The company’s diversified business mix, coupled with a wide geographical presence allows it to remain profitable even when macro economic conditions work against most businesses. At the moment, United Technologies is well positioned for future growth thanks to its robust backlog and strategic cost-reduction efforts. We can expect the company to continue this momentum through 2017.

Key Highlights:

  • Sales at Otis grew organically by close to 1%. The segment continues to see sluggish growth in China on the back of increased pricing pressures. That said, business in the Americas continue to flourish, with sales from the region coming in 8% higher than the same period last year. Despite the increased revenues, earnings at the segment came in 5% lower year-over-year. The company expects to report a loss in the range of about $125 million to $175 million for the full year.
  • Climate, Controls and Security (CCS) witnessed an increase in organic sales by about 5% on a constant currency basis, while operating profits fell by about 1%. Revenues were driven in the quarter by strong North America residential HVAC, and commercial refrigeration sales of 11% and 12% respectively. Going forward, we can expect the segment to see some improvement over the second half of the year, driven by strong equipment orders, productivity initiatives, and better foreign exchange translations.
  • At Pratt & Whitney, the company recorded a 6% increase in organic sales. The top line was driven by a whopping 30% growth in the military engines business. Military sales jumped on the back of higher F135 deliveries, aftermarket strength, and increased development revenues. As expected, the segment managed to deliver about 134 GTF engines in the first half of the year. The company is confident that with additional industrial capacity being added through the year, Pratt & Whitney will remain on track to deliver its 2017 target of 350 to 400 GTF engines, including spares.
  • Aerospace Systems reported a decrease of about 1% in organic sales, while segment profit was up almost 2%. The top line was hurt by lower-than-expected OEM sales, which suffered on the back of declines in legacy program volume that more than offset growth on new programs through the quarter. That said, the company expects to see better performance through the second half of the year on increasing growth momentum at new programs.

 

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