By Calvin Biesecker

United Technologies [UTX] yesterday reported strong third quarter earnings on just a slight sales gain as ongoing restructuring initiatives to shed costs led to record operating segment margin.

Net income increased 13 percent to $1.2 billion, $1.30 earnings per share (EPS), from $1.1 billion ($1.14 EPS) a year ago, topping consensus estimates by two cents. Sales edged up a percent to $13.5 billion from $13.4 billion, as a three percent increase in organic growth was partially offset by adverse foreign currency impacts. Free cash flow was $1.5 billion.

All six of UTC’s operating segments boosted margins and profits, with overall segment margins up 160 basis points to 16.1 percent. The profit gains were led by the Fire & Security, Carrier and Pratt & Whitney segments, which each posted returns over 20 percent. Sikorsky, Hamilton Sundstrand and Otis each posted single-digit profit increases.

At Pratt, which posted a 7 percent increase in sales to $3.3 billion, profit gains were driven by the higher sales and foreign exchange impacts. Sales were up on commercial aftermarket revenues, particularly spares for large engines, and higher military volume and equipment at Pratt Canada.

Helicopter manufacturer Sikorsky posted a 6 percent decline in sales due to the mix of aircraft sold. However, operating profits increased due a favorable military aircraft mix and higher aftermarket volume. Sikorsky delivered 62 helicopters in the quarter, one more than a year ago, including 52 military craft.

For 2010, UTC pegged its earnings guidance at $4.70 EPS, the high end of its prior range, despite $100 million in additional restructuring costs. Sales are still projected to be $54 billion.

“As expected, commercial aerospace aftermarket orders have rebounded nicely but the commercial construction markets remain weak,” Louis Chenevert, UTC’s chairman and CEO, said in a statement. “Additional restructuring will further position us for solid earnings growth in the years ahead.”