United Technologies Beats 3Q Expectations

United Technologies (NYSE:UTX) reported earnings on 23^rd October.  With continued robustness in the engine/aerospace market, revenue came in higher by 10%, at $16.5 billion, and adjusted earnings per share were 12% higher. Both these figures beat consensus estimates. America was the biggest driver of the company’s growth with revenues rising by 10% during the quarter in the region.

We currently have a price estimate of $174 per share, which is higher than the market price. You can use our interactive dashboard, United Technologies’ Outlook,  to modify key drivers and visualize the impact on the price estimate.

With Pratt & Whitney’s revenues rising by 23%, the division continues to be the key contributor to the company’s overall revenue. It should be noted, that military orders accounted for a large part of the 23% increase.  Going forward, the aerospace division is expected to continue its upswing, with increased order from commercial airlines, and the accretive addition of Rockwell Collins.

Headwinds, mainly higher FX rates, resulted in lower earnings in the Otis section. Otis systems, which is currently not making an operating profit, is expected to come into profitability in 2019, as cost cutting initiatives and improved supply chains start to take effect.

United Technologies saw a 14% drop in adjusted operating margins, mainly due to a 12.9% rise in costs, and administrative expenses. Improvements in the supply chain, as a result of the Rockwell Collins addition, should help reduce some of these cost increases in the coming quarters.

Overall, the quarter results came in much better than the market had expected. Provided United Technologies can continue to improve its presence in key markets outside of America, mainly China, we can expect revenues will continue to be robust in the coming quarters.

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