United Technologies’ 4Q profit fall 6 percent slips on lower revenue, restructuring costs

Wednesday, January 27, 2010

United Technologies’ 4Q profit falls 6 percent

HARTFORD, Conn. — United Technologies Corp., parent company of jet engine manufacturer Pratt & Whitney and the maker of Otis elevators, said Wednesday its fourth quarter profit fell 6 percent, weighed down by lower revenue and restructuring costs.

Most of United Technologies’ businesses struggled in the recession. Aerospace customers of Pratt & Whitney and Hamilton Sundstrand were hurt by the downturn in the aviation industry, Otis elevator was affected by China’s faltering economy and Carrier’s heating and ventilating equipment was dealt a setback early in the weakened housing market.

But CEO Louis Chenevert said United Technologies has benefited from a “relentless focus on costs across the business.”

The company earned $1.07 billion, or $1.15 per share, in the last three months of 2009, down from $1.15 billion, or $1.23 per share, a year ago.

The latest results include $135 million, or 8 cents a share, in previously disclosed restructuring charges for the fourth quarter.

Analysts expected the Hartford company to earn $1.14 per share, according to a survey by Thomson Reuters.

Revenue fell to $14.1 billion from $14.8 billion a year ago. That was in line with analysts’ expectations.

For the full year, the company based in Hartford said it earned $3.83 billion, or $4.12 per share, down 18 percent from 2008. Annual revenue fell 11 percent to $52.92 billion from $59.76 billion in 2008.

Otis, helicopter maker Sikorsky Aircraft and United Technologies’ fire and security business increased operating profit in the fourth quarter over the same quarter in 2008. But for the full year, Sikorsky was the only business with higher profit over 2008 due to rising military demand as the U.S. fights two wars.

“Year over year order rates have remained stable, although at low levels, and we saw increases in some Asian economies, notably China,” Chenevert said.

United Technologies reaffirmed its 2010 earnings forecast. Order rates will pressure revenue, particularly in the first half of 2010, Chenevert said. However, benefits from cost-cutting will lead to earnings growth of 7 percent to 13 percent with 2010 earnings per share of $4.40 to $4.65. Analysts expect earnings of $4.60 a share in 2010.

Revenue could begin to rise in the second half of the year “if then,” said analyst Rick Whittington of JSA Research Inc.

Holding down costs until then resumes is good for earnings, “but you’d like to see top line grow,” Whittington said.

Shares fell $1.74, or 2.5 percent, to $66.73.

Chief Financial Officer Greg Hayes told investor analysts in a conference call that United Technologies has shed nearly 18,000 jobs since the start of 2009, before the impact of acquisitions and divestitures. That represents about 8 percent of its global work force.

Carrier expects modest growth in housing this year, Hayes said. However, much of Carrier’s business will be from equipment replacement rather than installation in new houses.

So-called add-on replacement is more dependent on economic growth rather than strength in the housing market “and we expect all of that to be positive this year but not in a big way,” he said.

Hayes said 2011 will be “kind of a low point” for Pratt & Whitney’s military jet engine sales.

President Barack Obama and Defense Secretary Robert Gates prevailed in an effort to kill the F-22 fighter program in which Pratt & Whitney participated. However, backers of an alternative engine for the next generation F-35 Joint Strike Fighter outmaneuvered the administration. The main F-35 engine is built by Pratt & Whitney, and Hayes said production will not ramp up until 2013 or 2014.

The military “is certainly going to be a headwind” for Pratt & Whitney in the next couple of years, Hayes said.

But proponents of an alternative engine for the next generation F-35 Joint Strike Fighter outmaneuvered the administration, saving jobs in Ohio, Indiana and other states. The main F-35 engine is built in Connecticut by Pratt & Whitney.

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