United Tech 3Q profit up 11 pct, raises forecast
Thursday, October 20, 2011
HARTFORD, Conn. (AP) — United Technologies Corp. said Wednesday that its third-quarter profit jumped nearly 11 percent. Strong demand from emerging-market countries propelled orders at several of its aerospace and building systems businesses.
The manufacturing conglomerate raised its 2011 profit forecast for the third time this year.
The Hartford, Conn., company said it expects profit growth next year as well. But it’s cautious, and plans to increase cost-cutting because of the economic slowdown in the U.S. and Europe.
United Technologies, which makes jet engines, elevators and other aerospace and building systems components, said net income was $1.32 billion, or $1.47 per share, for the quarter ended Sept. 30. That’s up from $1.20 billion, or $1.30 per share, in the third quarter of 2010.
Revenue rose 9 percent to $14.8 billion from $13.62 billion.
Analysts polled by FactSet had expected earnings per share of $1.44 on revenue of $14.55 billion.
United Technologies raised its 2011 profit guidance, to $5.47 per share, up from $5.35 to $5.45 previously. Chief Financial Officer Greg Hayes, speaking to investor analysts in a conference call, credited the improved outlook to lower interest costs and lower taxes. He also cited strong profits in the Sikorsky division, which makes helicopters and has benefited from increased military orders to support U.S. operations in Afghanistan and Iraq.
The outlook includes a charge of about 5 cents per share related to the $16.4 billion deal to buy Goodrich Corp., which makes jet components such as landing wheels and brakes.
United Technologies expects the deal, announced in September, to close in mid-2012 and add to profit next year despite integration costs of about 30 to 40 cents per share.
Goodrich will complement United Technologies’ aerospace products and provide a lucrative repair and maintenance market, Hayes said.
Edward Jones analyst Matt Collins said the success or failure of the acquisition will depend on the strength of the economy.
“If Boeing and Airbus successfully ramp up production over the next five years, Goodrich should be a home run,” he said. Boeing Co. recently delivered its first new 787 after years of delays. Airlines have ordered more than 800 of the planes, which compete with the Airbus A350.
Despite declining profits and flat capacity at many major airlines, United Technologies’ aerospace division is growing.
New equipment orders rose 24 percent at aerospace parts maker Hamilton Sundstrand during the third quarter. Much of that gain was due to components made for Boeing’s 787 plane, which Hayes said represents “just the start” of revenue from equipment installed on the plane.
He said that Boeing and Airbus both planned to ramp up production as airlines needed to replace old planes. The “resilient” market for airline repairs and maintenance had also helped grow United Technologies’ orders, he added.
The company also posted strong order growth at its building components businesses. Orders rose 19 percent at elevator manufacturer Otis and 11 percent for heating and cooling equipment orders at Carrier.
Hayes said Carrier and Otis are benefiting from strong commercial construction and housing markets in China, helping offset weak construction in Europe.
But economic growth is now slowing slightly in Brazil, China and India, he said.
United Technologies is planning to cut $300 million in costs this year, up from previous plans for $200 million.
Shares fell 86 cents to close at $73.26 Wednesday.