Company Update (NYSE:UTX): United Technologies Corporation Reports Third Quarter 2015 Results

United Technologies Corporation (NYSE:UTX) reported third quarter 2015 results. All results in this release reflect continuing operations unless otherwise noted.

Third quarter earnings per share of $1.61 and net income attributable to common shareowners of $1.4 billionwere down 17 percent and 19 percent, respectively, versus the third quarter of 2014.  Results for the current quarter include restructuring costs of $0.06 per share, while earnings per share in the year ago quarter included$0.22 of favorable one-time items net of restructuring.  Excluding these items in both quarters, earnings per share of $1.67 decreased 2 percent year-over-year.  Foreign currency had an unfavorable impact of $0.05, or 3 percent in the quarter.  Excluding the impact of both unfavorable foreign exchange rate changes and restructuring and one-time items, earnings per share were up 1 percent year-over-year.

Sales of $13.8 billion decreased by 6 percent in the quarter, driven by 5 points of adverse foreign exchange and a 1 point decline in organic sales primarily attributed to a delay in engine deliveries as a result of the transition to a new logistics center at Pratt & Whitney.  These deliveries should largely be recovered in the fourth quarter.  Third quarter segment operating margin was 17.2 percent, and 17.6 percent when adjusted for restructuring costs.

“United Technologies is executing the strategic plan set forth earlier this year and is focused on maximizing the performance of our core building and aerospace systems businesses under a flatter and more transparent organizational structure,” said Gregory Hayes, UTC President and Chief Executive Officer. “We are on track to deliver results within our previous guidance ranges for full-year EPS of $6.15 to $6.30 and sales between $57 and $58 billion.”

Otis new equipment orders in the quarter increased 2 percent over the prior year at constant currency. Equipment orders at UTC Climate, Controls & Security decreased 2 percent. Commercial aerospace aftermarket sales were up 8 percent at Pratt & Whitney and up 1 percent at UTC Aerospace Systems on an organic basis.

“Our long-term growth outlook remains strong and we are well-positioned to continue creating value for our shareholders,” Mr. Hayes added. “UTC has world class, industry-leading franchises that provide differentiated technologies to very attractive end markets, create a strong base of recurring revenues, and generate a reliable stream of cash flow through cycles.  Our approach to capital allocation remains balanced as we successfully reinvest in our business, evaluate M&A opportunistically and return cash to shareholders.”

UTC expects the previously announced sale of its Sikorsky unit to close in the fourth quarter of 2015.  The Board of Directors has authorized a new $12 billion share repurchase program, including the $6 billionaccelerated share repurchase using the net proceeds from the Sikorsky sale. The new share repurchase program replaces the previous program announced on July 20, 2015.  The timing and amount of repurchases will be determined based on the Company’s evaluation of market conditions and other factors.  The program may be suspended or discontinued at any time.

“United Technologies’ shares are an attractive investment opportunity which we are going to take advantage of in order to increase value for our shareholders,” said Mr. Hayes.  “Including the $4 billion in repurchases made to date in 2015, we now expect to complete $16 billion of share repurchases through 2017.”

Cash flow from operations was $1.0 billion and capital expenditures were $390 million in the quarter. Share repurchase in the quarter was $1.0 billion and takes the year to date total to $4.0 billion.  UTC continues to assume a placeholder for full year acquisition spend of $1 billion and expects cash flow from operations less capital expenditures in the range of 90 to 100 percent of net income attributable to common shareowners for 2015. (Original Source)

Shares of United Technologies closed yesterday at $92.05. UTX has a 1-year high of $124.45 and a 1-year low of $85.50. The stock’s 50-day moving average is $91.35 and its 200-day moving average is $105.04.

On the ratings front, United Technologies  has been the subject of a number of recent research reports. In a report issued on October 13, RBC analyst Robert Stallard downgraded UTX to Hold, with a price target of $110, which represents a potential upside of 19.5% from where the stock is currently trading. Separately, on October 8, J.P. Morgan’s Stephen Tusa initiated coverage with a Hold rating on the stock and has a price target of $104.

According to, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Robert Stallard and Stephen Tusa have a total average return of 4.3% and 2.9% respectively. Stallard has a success rate of 58.8% and is ranked #825 out of 3793 analysts, while Tusa has a success rate of 62.3% and is ranked #1376.

The street is mostly Neutral on UTX stock. Out of 7 analysts who cover the stock, 5 suggest a Hold rating and 2 recommend to Buy the stock. The 12-month average price target assigned to the stock is $107.00, which represents a potential upside of 16.2% from where the stock is currently trading.

United Technologies Corporation provides high technology products and services to the building systems and aerospace industries. Its business segments are Otis, UTC Climate, Controls & Security, Pratt & Whitney, UTC Aerospace Systems and Sikorsky.

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