United Tech (NYSE:UTX)
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By Thomas Gryta
United Technologies Corp. said its profit rose 3.7% in the first quarter and the industrial conglomerate boosted its earnings projections for 2019, citing better-than-expected results from its recent acquisition of airline-parts maker Rockwell Collins Inc.
The Farmington, Conn.-based company reiterated its revenue and cash-flow guidance for the year and said it remains on track to split into three companies by mid-2020. The strong results from the aerospace portions of its business bolstered the company's case for spinning off the Otis elevator and Carrier building-systems businesses into separate companies.
"We had a really good start to the year," Chief Executive Greg Hayes said on a conference call Tuesday. He highlighted that the Otis division performed above internal projections and a lower tax helped the results overall.
Shares of UTC rose 3.4% to $141.61 in morning trading. As of Monday, the company's shares were up 29% for the year and 11.3% in the past 12 months.
The new Collins Aerospace division, a combination of the $23 billion Rockwell Collins acquisition and UTC's previous aerospace business, is expected to meet its goals for the year even with lost profit of up to 10 cents a share from the grounding of Boeing's 737 MAX program.
The company provides numerous parts for the airplane and said it is on track for $150 million in cost savings this year from buying Rockwell. It still targets at least $500 million in overall savings.
Mr. Hayes said he expects both Otis and Carrier to be ready for separation by year-end but that selling one or both of the companies is unlikely before they become independent. He had previously said he would be open to a deal for the right price, as long as the transaction could be tax-free and not delay the breakup.
The timing now makes it difficult to get a deal done, he said Tuesday, but there are attractive opportunities that could be pursued by the new companies after the separation.
In the first quarter, the company reported a net income of $1.35 billion, or $1.56 a share, up from $1.3 billion, or $1.62 a year earlier. Adjusted earnings of $1.91 a share were above the $1.71 a share projected by analysts polled by Refinitiv.
Revenue of $18.37 billion in the quarter also exceeded analysts' average estimate of $17.99 billion.
Sales at Carrier dropped 1.2% and Otis rose 1.9%, while profit fell at both businesses. Pratt & Whitney sales jumped 11.3% and sales at the new Collins Aerospace division climbed 70.6% as profit rose. Commercial aftermarket sales at Collins Aerospace increased 64% and were still up 12% on a pro forma basis for the Rockwell Collins deal.
Profit margins fell across the conglomerate to 12% from 13.1%, while adjusted margins inched up to 13.7% from 13.6%.
United Technologies said it now expects 2019 adjusted earnings of $7.80 to $8 a share, up from a previous range of $7.70 to $8. Analysts had already expected the results to be near the top end of the company's projection with an average estimate of $7.91 a share.
The company is "really confident" of the revised guidance, Mr. Hayes said, and he expects each business segment to show both profit and revenue growth for the full year.
UTC backed its previous 2019 sales guidance of $75.5 billion to $77 billion, which is below analyst expectations of $77.19 billion. It continued to project free cash flow of $4.5 billion to $5 billion.
Write to Thomas Gryta at firstname.lastname@example.org
(END) Dow Jones Newswires
April 23, 2019 12:03 ET (16:03 GMT)
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