United Technologies (UTX – Free United Technologies Stock Report), the diversified manufacturer and Dow-30 component, has reported third-quarter results that were slightly better than we had anticipated. It also bumped up its full-year profit guidance. Share earnings of $1.47 exceeded our $1.44 forecast and the 2010 comparable period tally of $1.30. Revenues of $14.8 billion were a bit above our expectation, with gains realized across each of the six operating segments. The operating margin remained in step with the prior-year quarter. The impact of cost reductions was offset by higher development outlays and currency headwinds at the Pratt & Whitney aircraft engine unit, as well as certain negative factors at the Otis elevator segment. The company now looks for share net of $5.47 for the year, versus our previous estimate of $5.45. The stock has hardly moved on this largely in-line performance.
In terms of the construction-related divisions, Otis' sales climbed a solid 12%, behind strength in equipment demand from China and Russia, along with rising service revenues. However, pricing weakness and commodity cost hikes pressured divisional margins somewhat. Second, Carrier, the HVAC division, reported 8% higher sales with growth in North America driven by sales of split systems, mitigated by lower gas furnace demand. Carrier's operating profits advanced 11%, as margins widened despite a greater mix of lower efficiency products. Finally, UTC Fire & Security posted a modest income gain on 5% top-line expansion. Product sales ascended high-single digits and service and install sales descended by low-single digits.
On the aerospace side, Pratt & Whitney's revenues rose modestly due to increased aftermarket sales and commercial deliveries, though military orders declined. Segment profits fell by 2%. Elsewhere, Hamilton Sundstrand's operating profit gain of 11% on 8% sales growth was fueled by soaring sales of commercial spare engines and reduced costs. Also, Sikorsky registered a healthy bottom-line advance, propelled by international aircraft deliveries and aftermarket volumes.
Order trends point to ongoing improved performance, as illustrated by a 9% year-over-year uptick in the backlog. China was instrumental, particularly at Carrier, where orders rose 12%. Notably, too, Hamilton's order level was up a hefty 24%. Carrier's U.S. orders were improved, though mix issues may persist. Pratt and UTC Fire's backlogs are running slightly up from last year.
About The Company: United Technologies operates in six business segments. Pratt & Whitney (24% of 2010 revenues, 23% of operating profits) makes and services aircraft engines. Otis (21%, 32%) manufactures and services elevators. Carrier (19%, 10%) makes heating, ventilating, and air-conditioning equipment. Sikorsky (14%, 12%) makes helicopters. Hamilton Sundstrand (10%, 12%) produces aerospace and industrial products. UTC F&S (12%, 11%) provides security and fire protection services. The company also has a power division dealing in fuel cells. International operations account for nearly half of revenues.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.