United Technologies 1Q profit climbs 20 pct on cost-cutting, revenue slips

By Srs-sw, AP
Wednesday, April 21, 2010

United Technologies 1Q profit jumps on cost cuts

HARTFORD, Conn. — United Technologies Corp. said Wednesday its first quarter profit jumped 20 percent, the first increase in a year as the industrial conglomerate cited its efforts to cut costs and boost productivity. Its shares climbed to a 52-week high.

The parent company of jet engine manufacturer Pratt & Whitney, Otis elevators and Sikorsky Aircraft raised the lower end of its 2010 profit guidance to $4.50 per share from $4.40 per share.

“Continued focus on cost reduction and productivity, as well as savings from restructuring actions, led to margin expansion across each of our businesses,” CEO Louis Chenevert said in a statement.

United Technologies is also benefiting from rising orders, particularly in emerging markets, he said. As a result, Chenevert said he expects business growth will resume in the second half of the year.

Its shares rose $1.40, or 1.9 percent, to $75.60 in morning trading after rising to their highest level in the past year at $75.73 earlier in the session.

The Hartford company earned $866 million, or 93 cents per share, in the January-March period, up from $722 million, or 78 cents per share, a year ago.

Analysts surveyed by Thomson Reuters expected earnings of 90 cents per share.

Revenue slipped to $12.1 billion from $12.25 billion a year ago. Analysts expected revenue of $12.26 billion.

United Technologies expects earnings per share this year in the range of $4.50 to $4.65, which includes $350 million in expected restructuring charges and one-time gains of $100 million. Analysts expected earnings of $4.63 a share but generally exclude one-time items.

Restructuring costs last year were $800 million, which included the elimination of 14,000 jobs.

Profit rose at each of United Technologies’ businesses, led by Carrier heating and ventilating. Orders for Carrier’s transport refrigeration and air conditioning business Transicold rose 37 percent in the quarter, while orders for commercial heating, ventilating and air conditioning equipment fell 4 percent, reflecting weakness in commercial real estate markets.

Improvements in Carrier reflect restructuring and cost reduction in addition to benefits of a “relatively easy” comparison with a tough first quarter of 2009, Chief Financial Officer Greg Hayes told investor analysts on a conference call.

“Obviously, the order rates are up wonderfully at Transicold and probably a little bit stronger than we had anticipated,” he said.

Truck trailer equipment orders in North America and Europe are up more than 80 percent from a very low base, he said.

Carrier was among the first United Technologies businesses to feel the impact of the recession in 2007 when the housing market collapsed. Its refrigerated transportation container business plunged 80 percent in 2008.

Analyst Nick Heymann of Sterne Agee said investors are more interested in strong revenue than profit.

“Margins right now are not as influential for investors as revenue growth,” he said. “People wanted to see a short to intermediate pickup in revenue.”

In addition, investors are wary about benefits from favorable currency exchange rates that Heymann said will eventually end.

He said he expects a “gradual recovery” as order rates continue to pick up.

“This is a solid result but there’s no jubilation,” Heymann said.

Sikorsky Aircraft posted a 25 percent rise in operating profit, to $145 million, due to strong military orders.

And Otis elevator, which benefited from the boom in office construction in China but then fell as China’s economy weakened, reported a 17.8 percent increase in profit, to $596 million.

Revenue fell in United Technologies’ two aerospace businesses, jet engine maker Pratt & Whitney and Hamilton Sundstrand, which makes airline electrical systems. Pratt & Whitney Canada, which makes jet engines for business planes, shipped 633 engines in the first quarter, down from nearly 1,000 in the first quarter of 2009, Hayes said.

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