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United Technologies (UTX) Q1 Earnings Top, EPS View Revised

Zacks Equity Research

United Technologies Corporation UTX reported better-than-expected first-quarter 2019 results.Quarterly adjusted earnings came in at $1.91 per share, surpassing the Zacks Consensus Estimate of $1.75. The bottom line was also higher than the year-ago figure of $1.77.

Revenues came in at $18,365 million, up 20.5% year over year. The top line also outpaced the consensus estimate of $18,068 million. The improvement was driven by 8% contribution from organic sales growth and 15% positive impact of acquisitions, partially offset by 3% negative impact of currency translation.

Segmental Breakup

Otis’ revenues for the reported quarter were $3,096 million, up 1.9% year over year. Aggregate sales for the Carrier segment totaled $4,323 million, down 1.2%. Pratt & Whitney’s first-quarter revenues were $4,817 million, up 11% from the year-ago quarter. The top-line performance of the Collins Aerospace Systems improved 70.6% to $6,513 million.

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United Technologies Corporation Price, Consensus and EPS Surprise

United Technologies Corporation Price, Consensus and EPS Surprise | United Technologies Corporation Quote

Costs and Margins

Cost of products and services sold during the March-end quarter was $13,707 million, up 21.5% year over year.

Selling, general and administrative expenses in the first quarter jumped 16.7% to $1,997 million.

Adjusted operating margin was 13.7%, up 10 basis points.

Balance Sheet/Cash Flow

Exiting the first quarter, United Technologies had cash and cash equivalents of $6,240 million, up from $6,152 million as of Dec 31, 2018. Long-term debt was $41,004 million, down from $41,192 million recorded at the end of 2018.

During the January-March quarter, the company generated $1,500 million cash from operating activities compared with $453 million generated a year ago. Its capital expenditures were up 7.7% to $363 million.

Outlook

United Technologies is poised to boost its revenues and profitability on the back of stronger end-market demand and innovation investments. The acquisition of Rockwell Collins (completed in November 2018) is not only expected to fortify the company's existing product portfolio but also aid in launching innovative solutions for the aerospace customers. United Technologies expects the acquisition to be accretive to its adjusted earnings per share in 2019.

The company has revised 2019 earnings view to $7.80-$8.00 per share from the prior guidance of $7.70-$8.00. For 2019, it continues to expect revenues between $75.5 billion and $77 billion. Notably, the company expects 3-5% organic sales growth in 2019.

Zacks Rank & Key Picks

United Technologies currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the same space are Macquarie Infrastructure Company MIC, Honeywell International Inc. HON and Federal Signal Corporation FSS. While Macquarie sports a Zacks Rank #1 (Strong Buy), Honeywell and Federal Signal carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Macquarie delivered average earnings surprise of 0.51% in the trailing four quarters.

Honeywell pulled off average positive earnings surprise of 3.50% in the trailing four quarters.

Federal Signal delivered average earnings surprise of 21.65% in the trailing four quarters.

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