United Technologies Corporation (NYSE:UTX) reported third quarter 2016 results. All results in this release reflect continuing operations unless otherwise noted.
Third quarter GAAP EPS of $1.74 was up 8 percent versus the prior year and included 2 cents of net restructuring and other significant items. Adjusted EPS of $1.76 was up 5 percent versus the prior year. Net income in the quarter was $1.4 billion, up 1 percent versus the prior year. Sales of $14.4 billion were up 4 percent, driven by 5 points of organic growth partially offset by 1 point of adverse foreign exchange.
“United Technologies delivered another quarter of strong financial performance,” said UTC Chairman & Chief Executive Officer Gregory Hayes. “Organic growth across the aerospace units and solid cash generation across all businesses, even with continuing investments in the aerospace related ramp-up, give us high confidence in meeting our commitments to shareholders. Based on our year-to-date performance, we now expect slightly higher organic sales growth and we are raising the low end of our adjusted EPS outlook by ten cents and now expect 2016 EPS of $6.55 to $6.60 per share*.
“We continue to focus on innovation and execution in each of our businesses and this focus is starting to pay off. Otis new equipment orders in the quarter increased 2 percent over the prior year at constant currency and grew 8 percent excluding China. Our Geared Turbofan Engine continues to perform exceptionally well and is now in service with eight operators around the world. Dispatch reliability on the GTF powered A320neo is 99.9% and fuel burn is meeting – and in some cases exceeding – our targets. Customer demand for the Geared Turbofan Engine also remains strong and our order book has grown to 8,400 engines, including announced and unannounced firm and option engines.”
*Note: When we provide expectations for adjusted EPS and organic sales on a forward-looking basis, a reconciliation of the differences between the non-GAAP expectations and the corresponding GAAP measures generally is not available without unreasonable effort. See “Use and Definitions of Non-GAAP Financial Measures” below for additional information.
Cash flow from operations for the quarter was $2.0 billion (135 percent of net income attributable to common shareowners) and capital expenditures were $394 million. Free cash flow of $1.6 billion in the quarter was 108 percent of net income attributable to common shareowners.
Commercial aftermarket sales were up 11 percent at Pratt & Whitney, and up 2 percent at UTC Aerospace Systems. While equipment orders at UTC Climate, Controls & Security were flat on an organic basis, commercial and residential HVAC orders in the Americas were up 10 and 11 percent, respectively.
Hayes added, “In the quarter, we completed our $6 billion accelerated share repurchase and we are on track to return $22 billion in cash to shareholders from 2015 through 2017. With our focused portfolio of industry leading franchises, we remain confident in our ability to create significant long-term value for our shareholders.”
UTC updates its 2016 outlook and now anticipates:
- Adjusted EPS of $6.55 to $6.60 up from $6.45 to $6.60*;
- Total sales unchanged ($57 to $58 billion, year over year growth of 2 to 3 percent) including organic sales growth of 2 to 3 percent up from 1 to 3 percent;
- There is no change in the company’s previously provided 2016 expectations for free cash flow, share repurchases, and the placeholder for acquisitions.
*Note: When we provide expectations for adjusted EPS and organic sales on a forward-looking basis, a reconciliation of the differences between the non-GAAP expectations and the corresponding GAAP measures generally is not available without unreasonable effort. See “Use and Definitions of Non-GAAP Financial Measures” below for additional information. (Original Source)
Shares of United Technologies are up 3% to $102.50 in pre-market trading Tuesday. UTX has a 1-year high of $109.83 and a 1-year low of $83.39. The stock’s 50-day moving average is $101.71 and its 200-day moving average is $102.80.
On the ratings front, UTX has been the subject of a number of recent research reports. In a report issued on October 17, Deutsche Bank analyst Myles Walton reiterated a Hold rating on UTX, with a price target of $105, which implies an upside of 5.5% from current levels. Separately, on October 10, Citigroup’s Jason Gursky downgraded the stock to Hold and has a price target of $109.
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Myles Walton and Jason Gursky have a total average return of 5.6% and 19.2% respectively. Walton has a success rate of 60% and is ranked #340 out of 4190 analysts, while Gursky has a success rate of 76.5% and is ranked #267.
The street is mostly Neutral on UTX stock. Out of 9 analysts who cover the stock, 5 suggest a Hold rating and 4 recommend to Buy the stock. The 12-month average price target assigned to the stock is $110.86, which represents a potential upside of 11% from where the stock is currently trading.
United Technologies Corp. engages in the provision of products and services to the building systems and aerospace industries worldwide. It operates through five business segments: Otis, UTC Climate, Controls & Security, Pratt & Whitney, UTC Aerospace Systems, and Sikorsky. The Otis segment designs, manufactures and markets elevators, escalators, moving walkways and service. The UTC Climate, Controls & Security segment provides heating, ventilating, air conditioning and refrigeration solutions, including controls for residential, commercial, industrial and transportation applications, security and fire safety products and services. The Pratt & Whitney segment provides aircraft engines for the commercial, military, business jet and general aviation markets. The UTC Aerospace Systems segment provides aerospace products and aftermarket services for diversified industries worldwide. Its aerospace products include electric power generation, management and distribution systems, flight control systems, engine control systems, intelligence, surveillance and reconnaissance systems, engine components, environmental control systems, fire protection and detection systems, propeller systems, aircraft nacelles, and interior, actuation, landing and electronic systems. The Sikorsky segment manufactures military and commercial helicopters and also provides aftermarket helicopter and aircraft parts and services. This segment’s aftermarket business includes spare parts sales, mission equipment, overhaul and repair services, maintenance contracts and logistics support programs for helicopters and other aircraft.