United Technologies ( UTX ) reported a solid start to 2017. Earnings and revenues beat the consensus estimates by comfortable margins. This result marks the ninth straight quarter in which the company has managed to beat the earnings estimate. The top line was driven by commendable performances across all major segments. Even Otis and Aerospace, which had been lagging over the last few quarters, showed promise this time around. Additionally, orders were up across all segments, leading to an increase in organic sales by about 3%.
The company reiterated its guidance for the year, with revenues expected to come in around the $57.5 billion to $59 billion range (including a 2% to 4% organic growth), while earnings are estimated to come in at around $6.30 to $6.60 per share.
Key Highlights :
- Climate, Controls and Security ( CCS ) witnessed an increase in sales by about 6% on a constant currency basis, while operating profits fell by about 3%. Earnings were hurt on the back of an unfavorable contract adjustment of $25 million and foreign currency headwinds. Organic sales at the segment were reported up 2%. The increase was driven primarily by better-than-expected growth in North America HVAC and commercial refrigeration. Additionally, CCS witnessed the highest organic order growth in almost two years this quarter.
- At Pratt Whitney, the company recorded sales of $3.8 billion, reflecting a 4% increase organically. The jump was aided by a strong performance in aftermarket sales, partially offset by lower-than-expected growth figures at commercial and military. Additionally, the company managed to deliver almost 70 Geared Turbofan (GTF) engines in the quarter, in line with guidance. 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.
- Sales at Otis increased organically by almost 3%. However, the segment reported a 4% fall in operating profit. Contributions from higher volumes were more than offset by the continued pricing pressures in China. Additionally, strategic investments in service, IT and ED, and foreign exchange translation also weighed on earnings. New equipment and service sales were up in the single digits this quarter. Further, new orders were up significantly in all key markets except China and the Middle East.
- Aerospace Systems reported an increase of about 5% in organic sales, while segment profit was up almost 9%. The top line at the segment was primarily driven by a 12% increase in commercial aftermarket sales and a 30% growth in provisioning. The bottom line benefited from continued cost reduction, partially offset by unfavorable commercial OEM mix and higher ED. The segment’s solid start to 2017 has given confidence to the management. It reiterated its guidance, expecting operating profit to be up $50 million-$100 million for the full year.