United Technologies (UTX, Financial) reported its fourth quarter 2014 earnings on January 26, a day early due to the Northeast’s winter blizzard. The Diversified Industrials company was on target with analysts’ earnings expectation reporting earnings per share for the year of $6.82. Revenue for the year was just below expectations at $65.10 billion versus $65.18 billion. Fourth quarter results followed suit with earnings per share at analysts’ expectation of $1.62 and quarterly revenue of $17.00 billion versus the estimate of $17.14 billion.
United Technologies continued to see demand for its core business segments in 2014 with the greatest order demand for the fourth quarter in Otis and Climate, Controls and Security. In Otis, revenue was even for the quarter at $3.34 billion versus the same in the prior year with sales orders up 12%. For the full year revenue from the Otis business increased 4%. In Climate, Controls and Security, revenue for the fourth quarter was also even at $4.2 billion with orders up 11%. For the full year, revenue from Climate, Controls and Security increased eight basis points to $16.8 billion.
On a pure sales basis United Technologies’ Sikorsky business led revenue in the fourth quarter and full year. For the quarter Sikorsky’s helicopter sales revenue was up 10% contributing to full year sales revenue of $6.6 billion, up 6% from 2013.
In Pratt & Whitney demand for aircraft engines was steady. Fourth-quarter sales were down slightly from $4.09 billion to $4.02 billion with full-year sales up five basis points to $14.51 billion.
Demand in Aerospace Systems was up for the quarter and full year. Sales revenue for United Technologies’ aircraft systems and components increased 4% in the fourth quarter versus the previous year and 7% for the full year.
At the bottom line net income for all segments increased while profit margins also improved. For the fourth quarter net income was up 10% versus the previous year. For the full year net income was up 9%. In the fourth quarter each segment’s profit margin reported an increase with total segment operating profit margin increasing to 16.5% from 15.3% in the fourth quarter of 2013. For the year, segment operating profit margin increased to 16.6% from 15.7%.
Overall, United Technologies continued to report strong product demand for the fourth quarter and full year of 2014. Global economic forces and currency headwinds may be a slight factor in 2015 according to management which caused a change in the outlook for 2015. In its fourth quarter earnings comments management reported it would be lowering its earnings per share guidance for 2015 to a range of $6.85 to $7.05. Given the slightly lower market outlook for 2015 the stock has an approximate discounted cash flow value of $113.42. While slightly overvalued at its current market price of $118.75 the stock is in conformity with the Dow Industrials forward price to earnings ratio average of 14.80 at 15.34. Given the global economic headwinds in 2015 investors may want to watch for further price decreases before buying for the long-term.
