United Technologies Corporation (UTX - Analyst Report) reported second quarter 2015 net income of $1,542 million or $1.73 per share, down from $1,680 million or $1.84 in the year-ago quarter. The decrease in earnings was driven by a decline in revenues.
Excluding one-time items, recurring earnings for the quarter were $1.81 per share, down 2% year over year, which beat the Zacks Consensus Estimate of $1.71.
Total revenue for the second quarter decreased 5.0% year over year to $16,333 million. The decrease in revenues was primarily driven by the impact of adverse foreign exchange, partially offset by the benefit of organic growth. The reported revenues missed the Zacks Consensus Estimate of $16,660 million.
New equipment orders at Otis were up 5% from the year-earlier quarter. UTC Climate, Controls & Security equipment orders increased 4%. Commercial aerospace aftermarket sales were flat at UTC Aerospace Systems and up 1% at Pratt & Whitney.
Segment Results
Otis reported revenues of $3,098 million in the reported quarter, down 7.9% year over year. Revenues at UTC Climate Controls & Security stood at $4,454 million versus $4,429 in the year-ago quarter. Pratt & Whitney revenues increased by 2.4 % to $3,677 million in the second quarter. UTC Aerospace systems sales decreased 0.1% to $3,632 million. Sikorsky sales stood at $1,691 million versus $2,384 million in the year-ago quarter.
Operating profit of Otis decreased slightly to $627 million in the reported quarter from $693 million in the previous year. Operating profit at UTC Climate Controls & Security stood at $823 million versus $815 million in the year-ago period. Pratt & Whitney’s operating profit improved 12.7% year over year to $487 million in the reported quarter, while UTC Aerospace systems operating profit decreased to $580 million from $602 million in the year-ago quarter. Sikorsky’s operating profit stood at $165 million in the reported quarter versus a loss of $317 million in the prior year quarter
Consolidated segment operating profit in the fourth quarter stood at $2,552 million versus $2,355 million in the prior-year period. Segment Operating margin stood at 16.2% versus 12.8% in the year-earlier quarter.
Balance Sheet and Cash Flow
As of June 30, 2015, cash and cash equivalents were $5,933 million versus $5,235 million as of Dec, 31, 2014. Long-term debt stood at $19,489 million as of Jun, 30 2015 versus $17,872 million as of Dec, 31, 2014. The company had a debt-to-capital ratio of 41.0%.
Cash flow from operations aggregated $1,536 million for the quarter compared with $1,742 million in the year-ago quarter. Capital expenditures were $358 million in the quarter.
Others
United Technologies reached an agreement to sell its Sikorsky Aircraft business to Lockheed Martin Corp. (LMT - Analyst Report) for $9 billion in cash, subject to regulatory approvals. This transaction is expected to close by the year-end or by first quarter of 2016 and the proceeds from the sale are expected to be utilized to fund additional share repurchase.
Outlook
United Technologies intends to undertake additional cost restructuring, which are likely to drive earnings growth in the forthcoming quarters.
The company revised its 2015 guidance and expects full year EPS guidance to be in the range of $6.45 to $6.60 (including Sikorsky) down from the previous range of $6.55 to $6.85. Expectations from continuing operations are in the range of $6.15 to $6.30 down from $6.35 to $6.55 expected earlier.
Sales from continuing operations are expected in the range of $57 to $58 billion down from the prior range of $58 to $59 billion. The company expects acquisitions of $1 billion and cash flow from operations less capital expenditures in the range of 90% to 100% of net income in 2015.
United Technologies currently has a Zacks Rank #3 (Hold). Other stocks that look promising and are worth a look now include ITT Corp. (ITT - Analyst Report) carrying a Zacks Rank #1 (Strong Buy) and Carlisle Companies Inc. (CSL -Snapshot Report) carrying a Zacks Rank #2 (Buy).
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