United Technologies Corp. (UTX) reported first-quarter 2011 earnings per share from continuing operations of $1.13, above the Zacks Consensus Estimate of $1.06. The 19% year-over-year increase in the company’s earnings, along with improved margin, was led by the sustained cost reduction efforts of the company.
Total revenue in the quarter increased by 11% year over year to $13.3 billion. Revenue was above the Zacks Consensus Estimate of $12.8 billion.
New equipment orders at Otis were up 17% over the year ago quarter. Commercial HVAC new equipment orders at Carrier grew 26% including favorable foreign exchange of 2%. Commercial spares orders at Pratt & Whitney’s large engine business grew 33% and at Hamilton Sundstrand were up 23% over the year-ago quarter.
Total segment operating margin improved by 100 basis points year over year to 14.7%. Carrier posted an operating margin of 11.2% compared to 5.6% in the year-ago quarter. UTC Fire and Safety posted a margin of 10% compared to 8.7% in the year-ago quarter.
Cash flow from operations was $1.36 billion and, after capital expenditures of $180 million, exceeded net income attributable to common shareowners. Share repurchase in the quarter was $750 million and acquisition spending was $106 million.
Balance Sheet and Cash Flow
The company continues to maintain a strong cash flow position. Cash and cash equivalents were $4.4 billion with long-term debt of $10 billion and shareowners equity of $22.1 billion.
Outlook
The company anticipates 2011 EPS growth to be 11% to 14% on sales growth of 5%. 2011 sales are expected at $57 billion. EPS for 2011 are expected to be between $5.25 and $5.40.
The company’s most significant actions were at Carrier, related to ongoing portfolio transformation initiatives in overhead cost reduction projects, and at Hamilton Sundstrand, which continued to advance the low-cost sourcing strategy.
The financial performance of the company depends on conditions in the construction and aerospace industries. The company is also highly dependent on the U.S. government’s budgetary allocation for defense.
A reduction in capital spending in the commercial aviation or defense industries could have a significant effect on demand for UTX’s products, which could have an adverse effect on its financial performance or its results of operations. Its business may also be affected by government contracting risks.
Pratt & Whitney segment supplies aircraft engines for the commercial, military, business jet and general aviation markets. It also manufactures aerospace propulsion systems for the U.S. space shuttle program.
United Technologies Corporation provides high technology products and services to the building systems and aerospace industries worldwide. Growth is attributable to acquisitions and organic growth.
Otis, Carrier and UTC Fire & Security (collectively referred to as the commercial businesses) serve customers in the commercial and residential property industries worldwide. Carrier also serves commercial, industrial, transport refrigeration and food service equipment customers.
Pratt & Whitney, Hamilton Sundstrand and Sikorsky (collectively referred to as the aerospace businesses) primarily serve commercial and government customers in both the original equipment and aftermarket parts and services markets of the aerospace industry. Hamilton Sundstrand and Pratt & Whitney also serve customers in certain industrial markets. Honeywell International Inc (HON) is a major competitor.
We currently have a Neutral recommendation on United Technologies Corporation.
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