By Calvin Biesecker
United Technologies [UTX] yesterday reported double-digit declines in third quarter sales and earnings due to weakness in most of its markets, although aggressive restructuring enabled the multi-industrial firm to boost its overall segment operating margins.
Net income fell 17 percent to $1.1 billion, $1.14 earnings per share (EPS), from $1.3 billion ($1.13 EPS) a year ago, beating consensus estimates by two cents. The quarterly results included 13 cents EPS in restructuring costs after one-time gains versus three cents a year ago. Segment operating margins rose 20 basis points to 14.5 percent.
“Strong execution and our relentless focus on cost contributed to record segment operating margin even in the face of tough end markets,” Louis Chenevert, UTC’s president and CEO, said in a statement.
Sales dropped 11 percent to $13.4 billion, with organic revenue falling 7 percent. The impact of foreign currency exchange translation contributed to 3 percent of sales decline. Free cash flow was a strong $1.7 billion, 160 percent of net income.
The lone operating segment enjoying top and bottom line gains was Sikorsky, up 15 and 18 percent, respectively, on higher large helicopter deliveries. Profits were up on the higher volumes and cost controls, company officials said.
Pratt & Whitney and Hamilton Sunstrand, UTC’s two other aerospace divisions, saw operating profits and revenues fall. At Pratt, sales were down on lower commercial engine and aftermarket volume, more than offsetting higher military shipments. At Hamilton Sundstrand, sales declined on lower aerospace manufacturing and aftermarket volume as well as a drop in industrial activity.
UTC said it is seeing a turnaround in Asian economies, led by China.
The company pegged its expected EPS for 2009 at $4.10, right between its earlier projections of $4 to $4.20. The guidance reflects higher than anticipated restructuring costs. UTC expects earnings growth to resume in 2010 due to cost cutting that has resulted in a leaner organization, changes in the portfolio at the Carrier segment, a strong military backlog, and significant aftermarket content in all of its businesses.