By Lewis Krauskopf
Oct 22 United Technologies Corp, the
world's largest maker of elevators and air conditioners, raised
the low end of its 2013 profit forecast on Tuesday, as cost
savings from job cuts helped offset weakness in its defense
The diversified manufacturer, which also produces Pratt &
Whitney jet engines and Black Hawk helicopters, cut its
projection for full-year revenue to roughly $63 billion from $64
billion as third-quarter sales fell short of analysts' targets.
Uncertainty over the U.S. government sequestration program,
which involves spending cuts on federal projects, is weighing on
United Tech's military business, which accounts for about 18
percent of revenue, Chief Financial Officer Greg Hayes said in
"That's where the revenue shortfall occurred, both in the
quarter as well as for the full year," Hayes said. "The good
news is the rest of the business is doing well."
For example, Hayes pointed to rising orders in China, up 11
percent in the quarter for the company's Otis elevators
"China continues to be very, very strong," Hayes said.
Shares of United Tech, a component of the Dow Jones
Industrial Average, fell 0.5 percent to $107.11 in
morning trading. The stock is up more than 30 percent this year.
The company said third-quarter net income rose to $1.43
billion, or $1.57 per share, from $1.42 billion, or $1.56 per
share, a year earlier.
Earnings from continuing operations increased to $1.55 per
share from $1.37, topping the analysts' average estimate by a
penny, according to Thomson Reuters I/B/E/S.
Revenue rose 2.8 percent to $15.46 billion, missing
analysts' expectations of $16.18 billion.
Sales rose 11 percent in China and 3 percent in North
America, excluding acquisitions, while they fell 1 percent in
Operating profit rose in four of United Tech's five
segments, with the Sikorsky unit, which produces Black Hawks,
posting lower results.
Spare part orders at Sikorsky, which derives 80 percent of
its business from the military, are down 50 percent so far this
year, Hayes said.
"What we're finding is that the folks in Washington, because
of the uncertainty around sequestration, have not been ordering
anything they don't absolutely, positively need," Hayes said.
"So there's been a reluctance to commit funding for spare
Sikorsky also lost about one week of production due to the
U.S. government shutdown earlier this month, Hayes said,
although the effect on earnings was less than a penny per share.
United Tech said it expected to invest $500 million in
restructuring this year. The company, which reported having
218,000 employees at the end of 2012, has reduced its headcount
by about 2,000 jobs this year.
The company now expects full-year earnings of $6.10 to $6.15
per share, raising the low end from $6.00. Analysts have been
looking for a profit of $6.16 per share on revenue of $63.9
Last year, United Tech acquired plane component maker
Goodrich for $16.5 billion, the largest deal in its history.
With Goodrich, United Tech now derives 55 percent of its
revenue from its aerospace units, but wants to boost its
contribution from its commercial building businesses, Hayes
"We'd like to see more of a 50-50 split, and so we'll be
looking for acquisition opportunities on the building side,"
Hayes said, noting that the focus would probably be on deals in
To take advantage of urbanization in emerging markets,
United Technologies recently reorganized its elevator and
climate segments under one business.