United Technologies: The Year In Review

United Technologies (NYSE: UTX) has had an amazing year in 2o17. Right from the very first quarter, the company was posting top and bottom line figures that managed to consistently beat the street consensus. This success was primarily a product of the company’s diversified business mix, coupled with a wide geographical presence. These factors allowed it to remain profitable even when macro economic conditions worked against most businesses in the year.

At the moment, United Technologies is well positioned for future growth thanks to its robust backlog and strategic cost-reduction efforts. We can expect this momentum to continue further into 2018.

Key Highlights From The Year:

• Probably most exciting news coming out of the year for UTC is the company’s proposal to buy aviation parts manufacturer Rockwell Collins for about $30 billion.
  • The deal enables UTC to benefit from several operating synergies through lower costs, with more opportunities to cross-sell each company’s products. Such benefits are expected to make the company a significantly more important supplier of components to mammoth aircraft manufacturers like Boeing and Airbus, thereby increasing its bargaining power in the aerospace supplier market.
  • However, ever since its announcement, there have been many concerns raised by investors and customers alike. While investors believe that they aren’t being provided with adequate information about the deal, customers believe that the combined company, Collins Aviation, would become a monopoly capable of hurting the balance in the aviation market.
  • That said, many in the industry believe that the deal will go through without much of a hitch, and is expected to conclude by Q3 2018.
• After a significant struggle, it seems as though things at Pratt & Whitney are finally finding their rhythm. After seeing low growth figures in the first half of the year, in Q3 the segment managed to post an organic growth of about 15%. Further, it managed to deliver close to 120 engines in the latest quarter, a figure that nearly matches the total output for the entire first half. This means that, Pratt has delivered about 254 engines in the first 9 months, meaning it will most likely achieve its previously laid out target of delivering close to 350 to 400 engines over the course of the year.
• The positives aside, business at Otis and Aviation remained rather stagnant in the year. While revenues at Otis were offset by slowing industrial growth in China, Aviation was hurt by lower-than-expected OEM sales, which suffered on the back of declines in legacy program volume that more than offset growth on new programs. That said, the company is confident that things are expected to turn around for both segments going into 2018. We can expect to learn more about this on the upcoming earnings call.

Given the strong performance in the year so far, United Tech has decided to up its guidance a second time. The company now expects full year revenues to come in the range of $59 billion-$59.5 billion, up from $58.5-$59.5 billion, while full year earnings come in around $6.58–$6.63 per share, up from the previous range of $6.45-$6.60 per share.

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