Earnings Preview: United Tech to report 1Q results
HARTFORD, Conn. (AP) — United Technologies Corp., which manufactures jet engines, elevators and heating and cooling equipment, is scheduled to report its first-quarter results Tuesday, its first announcing it would not issue stock to finance its $16.5 billion purchase of aerospace parts maker Goodrich Corp.
WHAT TO WATCH FOR: United Technologies, the parent company of jet engine maker Pratt & Whitney, Otis elevator, Carrier heating and cooling and other aerospace and building systems companies, offers a view of the performance of several industries, including civil and military aviation and residential and commercial real estate and construction.
Analysts expect earnings and revenue to be down from the first quarter of 2011.
Cowen and Co. analyst Cai von Rumohr said in a recent research note that he expects first-quarter declines at Pratt & Whitney and at Carrier due to the weak U.S. residential market and heavy flooding in Thailand that damaged manufacturing plants. Otis also will show an impact from slowing economic growth in China, he said.
The declines will "outweigh likely solid gains" at the Hartford, Conn., conglomerate's aerospace components manufacturer Hamilton Sundstrand & Sikorsky helicopter, he said.
He also said the quarter's results will include a restructuring expense of perhaps $90 million to $100 million, or 7 cents per share.
Analyst Matt Collins of Edward Jones told investors recently that a key risk to his "Buy" rating is a "muted rebound in end markets such as commercial aerospace and commercial construction."
"Stalled recoveries or slowdowns in world economies also negatively impact sales and earnings," he said. "Overseas operations do expose United Technologies to currency and geopolitical risks."
United Technologies told investor analysts March 15 it planned to sell its rocket engine and wind power businesses to help finance the Goodrich deal. It also will take on between $8 billion and $10 billion in short- and long-term debt, use $3 billion in cash and $1.5 billion in mandatory convertible issues.
Collins said the announcement that United Technologies will not issue stock was widely expected and was "at least a partial driver" in the stock's rebound over the last several months.
The deal will position it to benefit from the gradual ramp-up in production by Boeing Corp. and Airbus over the next several years, he said.
United Technologies expects to close on the Goodrich deal in mid-year. But von Rumohr said the review by European regulators could delay the deal until the second week of August.
WHY IT MATTERS: Results could indicate the health of aerospace and building systems markets, the strength of exports and the impact on military sales of reduced U.S. involvement in Afghanistan and the removal of troops from Iraq. Pratt & Whitney builds military jet engines and Sikorsky manufactures the Black Hawk, a workhorse in both wars.
WHAT'S EXPECTED: Analysts are expecting earnings per share of $1.21 and revenue of $12.88 billion, according to FactSet.
LAST YEAR'S QUARTER: United Technologies reported per-share earnings of $1.11 and $13.34 billion in revenue.
