Lower earnings seen for United Technologies
HARTFORD, Conn. (AP) — Fourth-quarter and full-year results for United Technologies Corp. are due out on Wednesday before the market opens, closing out a tough year for the conglomerate's increasingly important aerospace markets.
WHAT TO WATCH FOR: The parent company of jet engine maker Pratt & Whitney, aerospace parts manufacturer Hamilton Sundstrand and other companies said in December that the acquisition of aircraft-parts maker Goodrich Corp. will help it overcome Europe's weak economy and reduced U.S. defense spending this year.
Meanwhile United Technologies tightened its 2012 profit outlook to $5.32 per share from a previous range of $5.25 to $5.35 on revenue of about $58 billion. Analysts expect $5.33 per share on $57.89 billion in sales, according to FactSet.
That compares with $5.49 per share on revenue of $58.19 billion in 2011.
Sterne Agee analyst Peter Arment said in a recent note to investors that he has a positive view of aerospace stocks. Equipment manufacturing "is ramping" and the aftermarket of repairs and maintenance will begin to grow after a sluggish nine months, he said.
Honeywell International Inc. and United Technologies are "well-positioned to play the recovering global economy and aftermarket growth," he said.
But Edward Jones analyst Christian Mayes said in a note that a risk to his "Buy" rating is a "muted rebound" in commercial aerospace and construction markets, which would have an impact on United Technologies' Otis and Carrier heating and cooling businesses.
In addition the military business of United Technologies is expected to slow as the U.S. winds down operations in Afghanistan and the Obama administration looks to the Pentagon to help reduce the federal budget deficit. Pratt & Whitney has announced twice since December that it's cutting jobs, citing falling demand for repair work and unspecified business conditions.
United Technologies, based in Hartford, Conn., spent much of 2012 pivoting more strongly into aerospace. As it completed its $18.4 billion purchase of Goodrich — the conglomerate's biggest deal ever — it shed segments it no longer considers core. Those included a wind power company, rocket engine and liquid propulsion systems business and industrial units of Hamilton Sundstrand.
WHY IT MATTERS: United Technologies' results in aerospace, defense and home and commercial buildings markets can show whether those markets are improving as the economy picks up. The conglomerate also does significant business in China and India and is an indicator of economic conditions in at least two major emerging markets.
WHAT'S EXPECTED: For the fourth quarter analysts, on average, expect earnings of $1.04 per share on revenue of $16.65 billion.
LAST YEAR'S QUARTER: United Technologies made $1.47 per share on $14.97 billion in revenue.