Stock Update (NYSE:UTX): United Technologies Corporation Reports First Quarter 2016 Results

United Technologies Corporation (NYSE:UTX) reported first quarter 2016 results.  All results in this release reflect continuing operations unless otherwise noted.

First quarter Adjusted EPS of $1.47 was up 2 percent versus the prior year.  GAAP EPS for the first quarter was $1.42 per share, which included $0.05 of restructuring charges.  Sales of $13.4 billion were flat year-over-year as 2 points of organic growth in the quarter was offset by 2 points of unfavorable foreign exchange.

“We are off to a solid start in 2016,” said UTC President and Chief Executive Officer Gregory Hayes. “UTC delivered strong operational performance in the first quarter with organic sales growth of 2 percent.  We are also making progress on our strategic priorities, particularly our ability to invest in innovation as we continue to focus on structural cost reduction.”

Cash flow from operations for the quarter was $795 million and capital expenditures were $286 million.  Free cash flow of 43 percent to net income was pressured by inventory build in support of the aerospace production ramp and included a payment of $237 million, the first of four annual payments related to the Canadian government settlement that was booked in the fourth quarter of 2015.  For 2016, UTC continues to anticipate free cash flow in the range of 90 to 100 percent of net income attributable to common shareowners.

Otis new equipment orders in the quarter increased 1 percent over the prior year at constant currency, and grew 6 percent excluding China.  Equipment orders at UTC Climate, Controls & Security decreased by 8 percent, primarily driven by a difficult compare in the refrigeration business.  At Pratt & Whitney, commercial aftermarket sales were up 19 percent, and up 1 percent at UTC Aerospace Systems.

“Notwithstanding a slow-growth global macro environment, we remain confident in our full-year 2016 EPS outlook of $6.30 to $6.60 per share,” Hayes added.  “As we look to the future, our focused portfolio of industry leading franchises is well-positioned to deliver on our commitments and create significant long-term shareowner value.”

UTC reiterated its 2016 outlook and continues to anticipate:

  • Adjusted EPS of $6.30 to $6.60 on sales of $56 billion to $58 billion;
  • Organic sales growth of 1% to 3%;
  • Free cash flow in the range of 90 to 100 percent of net income attributable to common shareowners;
  • Share repurchases of $3 billion in 2016, beyond the repurchases that will be completed in 2016 under the previously announced $6 billion accelerated share repurchase program;  and
  • A $1 billion to $2 billion placeholder for acquisitions. (Original Source)

Shares of United Technologies closed yesterday at $104.61, down $0.59 or -0.56%. UTX has a 1-year high of $119.66 and a 1-year low of $83.39. The stock’s 50-day moving average is $100.82 and its 200-day moving average is $94.96.

On the ratings front, UTX has been the subject of a number of recent research reports. In a report issued on March 21, Credit Suisse analyst Julian Mitchell maintained a Hold rating on UTX, with a price target of $102, which represents a slight downside potential from current levels. Separately, on March 11, Deutsche Bank’s Myles Walton maintained a Hold rating on the stock and has a price target of $102.

According to, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Julian Mitchell and Myles Walton have a total average return of 10.2% and 7.3% respectively. Mitchell has a success rate of 71.2% and is ranked #358 out of 3829 analysts, while Walton has a success rate of 65.9% and is ranked #231.

Overall, 4 research analysts have assigned a Hold rating and 3 research analysts have given a Buy rating to the stock. When considering if perhaps the stock is under or overvalued, the average price target is $108.86 which is 3.9% above where the stock closed yesterday.

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. 


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