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United Technologies posts higher Q3 profits

Oct. 23, 2012, Hartford, Conn. - United Technologies Corp. posted higher third-quarter net income and revenue Tuesday on rising orders in key businesses, but said it expects the U.S. economic recovery to remain anemic and offered a gloomy assessment of business in Europe.


October 23, 2012
By Carey Fredericks


Topics

The parent company of Otis Elevator, jet engine maker Pratt &
Whitney, Sikorsky helicopter, Carrier heating and cooling and other aerospace
and building system businesses said orders were up for Otis, heating
and cooling equipment in North America and airline spare parts.

But
United Technologies shaved its revenue outlook for the year due to what
it said is a weak recovery in commercial aerospace parts maintenance
and repair and uncertainty in the global economy.

It also increased its restructuring effort to brace for what it called a "challenging economic environment.''

The
Hartford, Conn.,-based company, said net income available to common
shareholders was US$1.42 billion, or $1.56 per share, for the three
months ended Sept. 30. That's up 7.5 per cent from US$1.32 billion, or
$1.47 per share, a year ago.

Earnings from continuing operations came to $1.37 per share. Analysts surveyed by FactSet expected $1.19 per share.

Revenue
rose almost six per cent to US$15.04 billion from $14.2 billion a year
ago. But analysts had expected $15.6 billion in revenue.

United
Technologies said it expects 2012 revenue of $58 billion, the low end of
its previous outlook. Analysts have forecast $58.4
billion. It also is increasing its 2012 restructuring costs to $600 million from $500 million.

The
conglomerate closed on its biggest deal in July, an $18.4-billion
purchase of aerospace parts maker Goodrich Corp. in Charlotte, N.C. It
said its third-quarter profit would have been lower than last year's
comparable period when accounting for $168 million in discontinued
operations related to several companies it's selling to help finance the
Goodrich purchase.

Accounting for companies it set aside for
sale such as industrial companies of aerospace manufacturing subsidiary
Hamilton Sundstrand, United Technologies said earnings fell to $1.25
billion from $1.29 billion in the July-September period last year.

The
acquisition of Goodrich and a separate $1.5 billion purchase by Pratt
& Whitney of Rolls-Royce' stake in a joint venture that makes engines for the Airbus A320 will reduce earnings per share by 10 cents, down from a previous estimate of 20 cents.

Analyst
Rick Whittington of Drexel Hamilton said the earnings results were
"fine under the circumstances,'' which includes slow economic growth.

United
Technologies, with its Goodrich acquisition, should capitalize on
improving airline parts repair and maintenance business and new engine
orders, he said.

"To me that's the new United Technologies, an aerospace company, not a diversified industrial business,'' Whittington said.

But
Joseph Nadol of J.P. Morgan said the results reflected some challenging
end-market trends that caused organic sales to decline by two per cent from the prior year.

"Management just hosted an analyst day in late September, and the fact that it is lowering overall company sales guidance to the low
end of the range and Pratt earnings guidance by $75 million just a few
weeks later is a sign of continued weakness in the end
markets,'' he wrote in a report.

Nadol
said order trends were mixed. Otis new equipment sales increased by 11
per cent, while Carrier orders were up three per cent.

"However,
commercial aftermarket demand remains under pressure and organic large
commercial spares at Pratt were down 21 per cent, worse than second
quarter's 15 per cent decline.''

Airbus said in August it plans
to double the $12 billion it spends with U.S. suppliers in response to
strong airplane sales. And Boeing Co. is aiming to speed up 787
production to 10 planes a month by the end of next year and plans to
deliver planes it has built and need reworking.

Chief Financial
Officer Greg Hayes told analysts on a conference call that United
Technologies expects "solid growth'' next year in commercial airline
manufacturing and maintenance and repair, residential heating and
cooling systems and U.S. commercial construction.

But the company
expects business in Europe to be flat in 2013 and anticipates declines
in U.S. military spending to continue even without an estimated $50 billion in defence cuts known as "sequestration'' scheduled for January unless Congress agrees on an alternate deficit reduction plan.


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