Diversified business conglomerate United Technologies Corp. UTX recently offered a healthy guidance for 2016 and revised its outlook for 2015 as it completed the sale of its helicopter business – Sikorsky Aircraft Corp. At the same time, the company announced a $1.5 billion multi-year restructuring plan to improve its profitability through stringent cost-cutting initiatives.
Last month, United Technologies closed the divesture of Sikorsky to Lockheed Martin Corporation LMT for $9 billion. The strategic move was aimed to focus on the core business of the company to arrest dwindling revenues. United Technologies expects to record $3.3 billion as after-tax gain from the transaction in fourth-quarter 2015. The company also announced that it had initiated an accelerated share repurchase program to return $6 billion to its shareholders.
Consequently, the company revised its earnings guidance for 2015. United Technologies currently expects adjusted earnings for 2015 to be in the range of $6.20 to $6.30 per share. For 2016, the company expects adjusted earnings to be in the range of $6.30 to $6.60 per share on revenues of $56 billion to $58 billion with an organic growth of 1%–3%.
In order to improve its margins, United Technologies will further implement a $1.5 billion multi-year restructuring program to reduce costs in high-cost locations, resulting in $900 million of annualized savings through 2018. Restructuring charges in 2015 are currently expected to be approximately $400 million, up from the prior expectation of $300 million.
Based in Hartford, CT, United Technologies provides high-end technology products and services to the building systems and aerospace industries worldwide. This Zacks Rank #3 (Hold) stock serves various end markets, such as aerospace, defense and commercial construction. The business diversification allows the company to remain profitable even in a tough economic climate.
United Technologies anticipates that the streamlined organizational set up would enable it to better serve its customers. In addition, the company expects that the strategic moves will further ensure a successful entry and production ramp-up of its Geared Turbofan engines to thwart intense competition from peers like General Electric Company GE, Honeywell International Inc. HON and Rolls Royce.
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