United Technologies Revenue Climbs -- Update
July 26 2016 - 12:43PM
Dow Jones News
By Ted Mann and Austen Hufford
United Technologies Corp. reported higher quarterly sales as the
conglomerate makes progress righting its struggling elevator unit
and ramping jet engine production to historically high levels.
Net sales rose 1.3% to $14.87 billion, with a 1% increase in
organic sales, prompting the company to boost the lower end of its
full-year revenue forecast and raise its adjusted earnings per
share expectation.
"Based on the first half, we feel very good about the year,"
Chief Executive Gregory Hayes said on the company's earnings
call.
Shares of the company traded 2.5% higher to $107.30 midday.
The strong quarter comes in a tumultuous period for United
Technologies, which also makes air conditioners, building controls,
and a broad array of aerospace products, from landing gear to
evacuation slides. Mr. Hayes warded off a $90 billion takeover bid
from rival Honeywell International Inc. earlier in the year.
That takeover attempt came amid Mr. Hayes' own struggle to
revive growth at Otis, the legacy elevator and escalator maker that
has historically been a font of cash for the conglomerate, but
which had been losing market share in China while struggling to
bounce back from recession in Europe. At the same time, Pratt is
overhauling its manufacturing operation to get a new family of
commercial jet engines -- known as the geared turbofan -- off the
factory floor and into the air.
The strain of the manufacturing ramp-up continued to weigh on
Pratt & Whitney, which saw its operating profit margin decline
to 10.1% from 13.2% the previous year, though commercial
aftermarket sales were up 20%.
Production hiccups delayed some of the first engine deliveries,
causing strain with some customers. Pratt delivered 36 engines in
the first half of the year and is on pace to ship a total of 200 by
the end of 2016. The pace of first-half shipments was slower than
the company projected in March, but in line with its latest
agreement with Airbus, Chief Financial Officer Akhil Johri
said.
The engine business is "not for the faint of heart," Mr. Hayes
said. "Our focus is just on delivering engines, and then servicing
them for the next 25 or 30 years."
At Otis, the company is investing in an overhaul of the
appearance of elevator cabs. The company will continue to invest
around 2% of its sales from its commercial building businesses in
research and development, Mr. Hayes said. China was still a drag on
Otis in the second quarter, with new equipment orders falling
14%.
At both Otis and Pratt, the company forecasts operating profit
will decline in 2016. Still, those results were better than
executives feared when they briefed investors in December, Mr.
Johri noted in an interview, calling it a "very pleasing first half
of the year."
Profit for the period fell to $1.37 billion, down 11% from the
prior year. The company raised its guidance for adjusted earnings
per share of between $6.45 and $6.60, increasing the low end from
$6.30. It expects revenue of $57 billion to $58 billion, up from
$56 billion to $58 billion previously.
Write to Ted Mann at ted.mann@wsj.com and Austen Hufford at
austen.hufford@wsj.com
(END) Dow Jones Newswires
July 26, 2016 13:28 ET (17:28 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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