The Rising Influence of Rising Affluence

[DewDiligence]

UTX Raises 2011 Guidance, Gives Cautious Outlook

[All six of UTX’s businesses—Otis, Carrier, fire/security, Pratt & Whitney, Hamilton Sundstrand, and Sikorsky—grew sales YoY. (There’s a recession?) See http://finance.yahoo.com/news/UTC-Reports-Third-Quarter-EPS-prnews-1144061858.html?x=0&.v=1 for UTX’s own PR on the 3Q11 results.

The stock currently trades at ~13x implicit 2012 EPS guidance of about $6.00. UTX is an old-style conglomerate that’s a solid holding, IMO, but I prefer 3M—a company that is considered a conglomerate but actually isn’t.]

http://online.wsj.com/article/SB10001424052970204485304576640692134591836.html

›OCTOBER 20, 2011
By KATE LINEBAUGH

United Technologies Corp. said customers of its Carrier heating and cooling business have been getting stingier in recent weeks.

In a sign that tougher times may be on the horizon, the conglomerate said sales of its heating and air-conditioning systems tilted sharply to the low end in the third quarter, a cautionary note in an otherwise strong period.

"Consumer sentiment is awful," said Greg Hayes, the company's chief financial officer. "People aren't spending any more money than they need."

The number of shipments in Carrier's U.S. residential business rose 8% during the quarter. But revenues were flat, Mr. Hayes said, because buyers are moving down from premium products to entry-level gear as consumers spend less and with the expiration of federal stimulus-related tax breaks.

About 75% of Carrier's sales were low-end products in the third quarter, compared with about 60% a year earlier, he said.

The performance of Carrier is the latest sign that the weak jobs environment and global financial woes are pinching consumers' ability to spend and keeping the U.S. economic recovery sluggish.

"The outlook for some of our end markets certainly feels weaker today than just a few weeks ago," Mr. Hayes said on a conference call Wednesday. "We had a very strong start to the quarter in July, and then in August things started to slow down and even further in September."

Still, United Technologies, which also makes Otis elevators and Pratt & Whitney aircraft engines, raised its per-share earnings forecast for the year to $5.47 from its increased July projection of $5.35 to $5.45, and affirmed its revenue outlook.

While next year is likely to be more difficult, the company is targeting earnings at its units to grow at least 10%. "We're doing whatever we can to try and make sure that that happens," said Mr. Hayes.

For the third quarter, the company reported a profit of $1.32 billion, up from $1.2 billion a year earlier. Per-share earnings rose to $1.47 from $1.30 a share, ahead of a consensus forecast of $1.44 among analysts. Revenue increased 8.7% to $14.8 billion, with currency fluctuations adding four percentage points of the growth.

United Technologies is expanding its aerospace business with the $16.4 billion purchase of Goodrich Corp. The sector continues to see expanding sales and margins, but the company's fire and security business, another focus of acquisitions, has seen a slowdown.

"We see a strong trend in emerging market orders even as developed markets have shown signs of weakness recently," Mr. Hayes said on the conference call.‹