By Calvin Biesecker
United Technologies Corp. [UTX] yesterday opened its fiscal year on a high note, posting double-digit earnings and sales gains and the diversified industrial firm raised its earnings guidance for the fiscal year.
Exceptionally strong results in UTC’s Carrier heating and cooling business led the company to increase its earnings guidance for the year. Carrier’s margins were a record 11.2 percent, up over 5 percent as operating profits soared over 100 percent.
Net income in the first quarter increased 16 percent to $1.1 billion, $1.11 earnings per share (EPS), from $947 million (93 cents EPS), as operating profits increased in five of six divisions, led by Carrier. Earnings topped consensus estimates by four cents. Operating margins were 14.7 percent, up a percent, and free cash flow was $1.2 billion.
Sales in the quarter increased 11 percent to $13.3 billion from $12 billion a year ago as each of its segments reported gains. UTC said that 9 percent of the growth was organic, led by double-digit gains at the Sikorsky helicopter division and Carrier.
At Sikorsky, sales increased 16 percent to $1.6 billion on higher military aircraft deliveries, increased aftermarket sales and international development work. Despite the sales jump, operating profits declined 2 percent to $141 million due to losses on the international work and fewer deliveries of S-92 helicopters.
At Pratt & Whitney, UTC’s aircraft engine business, sales increased 9 percent to $3.1 billion driven by improved aftermarket sales. Operating profits increased 3 percent to 471 million on the higher sales and benefits from previous restructurings, more than offsetting hefty increases in engineering and development costs.
UTC’s Hamilton Sundstrand division posted a 9 percent rise in sales to $1.4 billion on higher commercial aircraft and industrial volume. Operating profits increased 11 percent on the sales gains.
For the year, UTC raised its earnings guidance by a nickel to between $5.25 and $5.40 EPS. Sales are projected to be $57 billion, the high end of the previous guidance range.
The company said its order activity is robust, as commercial spares orders at Pratt’s large engine business increased 33 percent while orders were up 23 percent at Hamilton. At Carrier commercial orders were up 26 percent and up 17 percent at the Otis elevator division.
UTC officials expect the ongoing global economic recovery to continue but cautioned against two headwinds that could affect its business. One is the rising price of oil, which could force commercial air carriers to put off spares buys, Greg Hayes, UTC’s chief financial officer, said during yesterday’s earnings call.
The other threat to business is the impact on Japan’s electronics components manufacturers, some of which have been impacted by the disaster there stemming from the tsunami and resulting nuclear incident, Hayes said. So far the supplier issues haven’t been a “big deal” for UTC, he said.