United Technologies Corp. (UTX) reported results for the first quarter of 2012. Although the top-line declined marginally by 2% year over year, the bottom line was up a robust 24% year over year and also surpassed the Zacks Consensus Estimate by 27%.
First Quarter Highlights
Total revenue in the quarter declined marginally by 2% year over year to $12.4 billion. A divestiture impact of 2% and an unfavorable foreign currency translation impact of 1% contributed to the sales decline. Organic sales grew 1% year over year.
The company reported first-quarter 2011 earnings per share of $1.31, above the Zacks Consensus estimate of $1.20. Excluding the one-time items, earnings per share were $1.51. Quarterly earnings grew 24% year over year.
Agreement of Analysts
Among the analysts covering the stock in the last 7 days, two revised their estimates upward for the second quarter of 2012 and three revised upward for the third quarter. Similarly for the current year, two analysts revised estimates upward. However, for the current quarter and current year, four analysts and 1 analyst, respectively, have lowered estimates.
We believe such negative sentiments are due to the ongoing sovereign credit risk prevailing in Europe and lower underlying demand in the company’s electronic end markets. Furthermore, there has been an inventory destocking in the optical business as well.
Analysts are neutral about the performance of the company for fiscal 2012. Although the Goodrich acquisition is a positive for the company, it has come at a high price. Furthermore, the global construction market is still weak, although the company sees a recovery in the commercial aircraft market.
Magnitude of Estimate Revisions
During the last 7 days, the current estimate for the second quarter of 2012 was just a penny short of the Zacks Consensus Estimate of $1.45. For the third quarter of 2012, the current estimate was 2 cents short of the Zacks Consensus Estimate at $1.44.
Again for fiscal 2012, in the last 7 days, the current estimate was 4 cents short compared to the Zacks Consensus Estimate of $5.55.
Earnings Surprises
The first quarter earnings surprise for United Technologies was 14 cents or (11.0%). Analysts expect positive surprises for upcoming quarters. For the second quarter of 2012, the company expects a positive surprise of 1.39%.
Summary
The company delivered a modest performance in the first quarter of 2012, driven by growth at Hamilton Sundstrand. Furthermore, the company generated strong cash flow during the quarter. The acquisition of Goodrich is expected to boost revenues in fiscal 2012. UTX also made changes to its business portfolio to help serve its customers better and improve its sales growth. However, the weakness in the global construction market and the long-cycle business pattern of the company are concerns.
UTX currently has a Zacks Rank # 3 which implies a short term ‘Hold’ recommendation on the stock.
UTD TECHS CORP (UTX): Free Stock Analysis Report
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