The Global Demographic Tailwind

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UTX Profit Jumps on Cost Cuts

http://online.wsj.com/article/SB10001424052748704133804575197670338152614.html

›APRIL 21, 2010, 10:27 A.M. ET
By BOB TITA

United Technologies Corp.'s first-quarter profit rose 20% as cost reductions helped to offset lower revenue.

The multi-industry company—whose holdings include Otis elevators, Carrier heating and air conditioning systems, and Pratt & Whitney air craft engines—described conditions in its markets as "difficult but improving," according to Chief Financial Officer Greg Hayes.

New equipment orders rose 9% in the first quarter, but the company expects that most of its revenue growth will occur later in the year. First-quarter revenue slipped 1% from a year ago to $12.1 billion, slightly below Wall Street analysts' consensus estimate of $12.2 billion.

"Order trends are improving, and that's all in line with organic [revenue] growth resuming in the second half of 2010," Hayes said on a conference call with analysts. "We're confident in our improved outlook."

United Technologies tightened its 2010 profit outlook to $4.50 to $4.65 a share from $4.40 to $4.65 a share forecast in December, but left its revenue prediction for 2010 unchanged at $54 billion to $55 billion.

Hayes said he doesn't expect airlines to scale back their engine maintenance and replacement plans in response to lost revenue from disrupted air travel in recent days caused by ash from a volcano eruption in Iceland.

The company expects low single-digit revenue growth and a $75 million to $100 million increase in operating profit from its Pratt & Whitney engine unit. In the first quarter, revenue from the unit declined 9% from a year ago, while operating income fell 7.6%

"As the airlines have more cash, they're going to be able to afford more big repair bills," Hayes said.

The company's Otis elevator unit reported a 2.5% increase in revenue for the quarter. Carrier's operating profit soared despite falling sales, while the fire and security segment posted a 32% earnings increase as sales jumped 10%.

United Technologies eliminated 18,000 positions last year, helping the Connecticut-based company lower its overhead costs. The company's gross margin in the first quarter rose to 27.8% from 25.7%.

For the first quarter, the company's profit rose to $866 million, or 93 cents a share, from $722 million, or 78 cents a share, a year earlier. Restructuring costs accounted for 5 cents a share in the latest quarter and 9 cents a share a year ago. Analysts polled by Thomson Reuters expected earnings of 90 cents a share.

The company recently said it plans to buy back $1.5 billion worth of its shares. It bought back $500 million during the quarter.‹