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United Technologies Corp. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: October 26, 2012 12:02PM
United Technologies Corp. (UTX) filed Quarterly Report for the period ended 2012-09-30. United Technologies Corp has a market cap of $71.11 billion; its shares were traded at around $77.29 with a P/E ratio of 12.9 and P/S ratio of 1.2. The dividend yield of United Technologies Corp stocks is 2.7%. United Technologies Corp had an annual average earning growth of 9.6% over the past 10 years. GuruFocus rated United Technologies Corp the business predictability rank of 4-star.
Highlight of Business Operations:Sales in the first nine months of 2012 are consistent with sales levels in the prior year with the impact of net acquisitions (2%) offset by the adverse impact of foreign currency translation (2%). During the first nine months of 2012, two of the five business segments experienced organic sales growth: UTC Aerospace Systems (8%) and Pratt & Whitney (3%). The organic growth at UTC Aerospace Systems is driven by higher aerospace OEM (6%) and aerospace aftermarket (1%) volumes. Pratt & Whitneys organic growth is primarily a result of higher military engine and aftermarket sales (6%), partially offset by declines in Commercial spares sales (3%). Sikorsky organic sales contracted 12%, in the first nine months of 2012, following 13% organic growth in the first nine months of 2011, driven by reduced aircraft deliveries from foreign military operations (10%) in 2012.
The year-over-year increase in other income, net in the first nine months of 2012, largely reflects an approximately $215 million net gain from the sale of a controlling interest in a manufacturing and distribution joint venture in Asia and an approximately $142 million net gain from the sale of a controlling interest in a Canadian distribution business, partially offset by $103 million of impairment charges related to planned business dispositions and a $32 million loss on the disposition of the U.S. UTC Fire & Security branch operations, all of which are related to the ongoing UTC Climate, Controls & Security portfolio transformation. Gains recognized within other income, net in the first nine months of 2012 include $34 million on the fair value re-measurement of the Companys previously held shares of Goodrich and a $46 million gain as a result of the effective settlement of a pre-existing claim in connection with the acquisition of Goodrich. The remaining change in other income, net is attributable primarily to net gains recognized on miscellaneous asset sales and normal recurring operational activity as disclosed above.
Diluted earnings per share from continuing operations for the third quarter of 2012 includes a net $0.09 per share benefit from non-recurring items, offset by $0.09 per share of restructuring charges. The results for the third quarter of 2011 included $0.06 per share of restructuring charges, partially offset by a net $0.04 per share benefit from non-recurring items. For the first nine months of 2012, diluted earnings per share from continuing operations includes a net $0.49 per share benefit from non-recurring items, partially offset by $0.25 per share of restructuring charges. The results for the first nine months of 2011 included $0.12 per share of restructuring charges, partially offset by a net $0.09 per share benefit from non-recurring items.
The impact of foreign currency generated an adverse impact of $0.07 and $0.15 per diluted share on our operational performance in the third quarter and first nine months of 2012, respectively. This year-over-year impact includes the net adverse foreign currency translation impact at Pratt & Whitney Canada (P&WC). At P&WC, strength in the U.S. Dollar in 2012 generated a benefit from foreign currency translation as the majority of P&WCs sales are denominated in U.S. Dollars, while a significant portion of its costs are incurred in local currencies. To help mitigate the volatility of foreign currency exchange rates on our operating results, we maintain foreign currency hedging programs, the majority of which are entered into by P&WC. As a result of hedging programs currently in place, P&WCs 2012 full year operating results are expected to include a net adverse impact of foreign currency translation and hedging of approximately $50 million. The net impact of foreign currency translation and hedging at P&WC was an adverse impact of $22 million and $32 million in the quarter and first nine months of 2012, respectively. For additional discussion of hedging, refer to Note 9 to the Condensed Consolidated Financial Statements.
The decrease in operational profit in the first nine months (4%) is due primarily to lower new equipment volume in China (1%), higher overhead expense (2%), commodity costs increases (1%), the impact of higher accounts receivable reserves (1%), and lower service contribution (1%), all of which were partially offset by savings from cost reduction initiatives (3%).
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