United Technologies Corp (UTX) reported second quarter 2013 earnings from continuing operations of $1.70 per share, up from $1.62 in the year-ago quarter. The reported earnings per share (EPS) beat the Zacks Consensus Estimate of $1.56. Before one time items, EPS increased 4.0% year over year. The increase in earnings was driven by higher revenues in both Pratt & Whitney and UTC Aerospace systems businesses.
Total revenue for the second quarter 2013 grew 16% year over year to $16.0 billion, but missed the Zacks Consensus Estimate of $16.2 billion. The increase in revenues was driven by net acquisitions. Organic sales were flat year over year.
New equipment orders at Otis were up 23% over the year-earlier quarter. UTC Climate, Controls & Security equipment orders increased 6% organically. Organically, commercial spares orders increased 15% at Pratt & Whitney. On a pro-forma basis, commercial spares orders were up 4% at UTC Aerospace Systems. However, large commercial engine spares orders were up 65% at Pratt & Whitney (including benefit from International Aero Engine).
Segment Results
Otis reported revenues of $3,138 million in the second quarter, up 3.6% year over year. At the same time, revenues at UTC Climate Controls & Security declined 0.6% year over year to $4,543 million. Pratt & Whitney revenues increased 5.1% year over year to $3,624 million in second quarter. UTC Aerospace systems sales jumped to $3,321 million from $1,254 million in the year ago quarter. Additionally, Sikorsky sales were down 3.3% year over year to $1,566 million in the second quarter.
Segment operating profit in the second quarter increased 15% year over year to $2507 million.
Balance Sheet and Cash Flow
The company continues to maintain a strong cash flow position. As of Jun 30, 2013, cash and cash equivalents were $4.9 billion with long-term debt of $20.4 billion. The company had a debt to capital ratio of 43.0%. Cash flow from operations was $1.9 billion while capital expenditures were $369 million in the reported quarter. The company repurchased shares worth $335 million in the reported quarter.
Outlook
Concurrent with the strong quarterly results, sales in 2013 are expected to be $64 billion. The company increased the lower end of its earnings guidance range from $5.85 – $6.15 per share to $6.00 – $6.15 per share driven by strong execution, additional restructuring savings and growing backlogs. The company expects to invest $450 million in restructuring for 2013.
Additionally, Goodrich and IAE acquisitions are expected to create new opportunities for growth in the long term.
United Technologies currently has a Zacks Rank #3 (Hold). Other stocks that look promising and are worth a look in the industry include Macquarie Infrastructure Company LLC. (MIC), Hutchison Whampoa Ltd. (HUWHY) and General Electric Company (GE), each carrying a Zacks Rank #2 (Buy)
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