United Technologies Corp. (UTX, Financial), a company that Bill Ackman (Trades, Portfolio) and Daniel Loeb (Trades, Portfolio) both established an activist stake in over the past five months, said organic sales increased at least 5% organic sales growth for the fourth consecutive quarter.
Ackman and Loeb have not released their second-quarter portfolios as the deadline is 45 days after quarter-end. Despite this, both event-driven hedge fund managers established a stake in United Technologies during the first quarter: Ackman invested in 1,944,420 shares while Loeb invested in 7.1 million shares. The stock averaged $131.23 during the quarter.
Company accelerates organic sales growth across key business segments
CEO Gregory Hayes said results for the quarter ending June 30 “demonstrated continued momentum” for United Technologies, led by “investments in innovation” across the company’s portfolio. The Farmington, Connecticut-based company reported consolidated revenues of $16.71 billion, outperforming consensus estimates by approximately $500 million. GuruFocus ranks United Technologies' business predictability four stars out of five as the company has shown consistent revenue and earnings growth over the past 10 years.
Both Pratt & Whitney and UTC Aerospace Systems achieved a 12% year-over-year increase in commercial aftermarket sales during the quarter, contributing to 12% organic sales growth in the former and 8% organic sales growth in the latter. Hayes mentioned on the call that Pratt & Whitney delivered a 10-year high of over 200 large commercial engines in a single quarter. The business segment’s GTF engines will power 60 Airbus SE (XPAR:AIR, Financial) A220 aircraft from JetBlue Airways Corp. (JBLU, Financial), according to the earnings presentation.
Company updates on “breakup plan”
Ackman and Loeb suggested in their first-quarter shareholder letters that United Technologies should be split into three separate companies: Otis; Climate, Controls and Security; and Aerospace Systems and Pratt & Whitney. Hayes said during the Q&A section of the call that “all options are on the table” and that management is working with the board of directors to find alternative ways to “maximize [the company’s] value for shareholders.” The CEO expects to have a decision by the fourth quarter.
Company raises earnings guidance for the year
Hayes increased the company’s sales and earnings guidance for the year based on its strong year-to-date performance. For the year, the CEO expects improved organic sales growth between 5% and 6% and adjusted earnings per share between $7.10 and $7.25. However, the earnings guidance excludes the projected dilution of 10 to 15 cents due to the pending acquisition of Rockwell Collins Inc. (COL, Financial).
Shares of United Technologies traded approximately 3.36% higher than its previous close of $129.37 as the company outperformed top-line analyst estimates and provided strong full-year earnings guidance. The company’s share price reached an intraday high of $134, approximately 2.11% higher than the average share price during the first quarter.
Disclosure: no positions.
