4 Min Read
By Lewis Krauskopf
Jan 22 (Reuters) - United Technologies Corp, the world's largest maker of elevators and air conditioners, reported a rise in fourth-quarter profit that topped estimates, helped by a delay in shipping a helicopter order.
The diversified manufacturer said it did not ship eight helicopters under a Canadian contract, as expected, which actually benefited its profit because they are sold at a loss, helping the profit top estimates. However, revenue was reduced by about $400 million because the helicopters were not delivered.
Costs for the maritime helicopters have increased under the contract with the Canadian government, to the point that each is now expected to cost the company's Sikorsky unit more to make than the price covers. The company expects to deliver the helicopters later this year.
Total revenue at United Technologies, which also produces Pratt & Whitney jet engines and Black Hawk helicopters, rose 1.9 percent to $16.76 billion, it said on Wednesday. That was about $330 million short of analysts' expectations.
United Technologies shares rose 1 percent to $116.12 in morning trading. The stock, a component of the Dow Jones industrial average, jumped about 37 percent in 2013, outpacing the broader U.S. market.
In an interview, United Technologies Chief Executive Officer Louis Chenevert pointed to revenue growth of 4 percent, excluding acquisitions and even with the delayed helicopter shipment.
"The combination of organic growth and our sustained cost reduction has us well-positioned for another good year," Chenevert said.
United Technologies backed its 2014 financial targets, which the company set last month.
The company had improved its 2013 earnings outlook in recent quarters, as cost cuts offset weaker revenue than it expected at the start of the year.
Earnings from continuing operations soared 53 percent to $1.45 billion, or $1.58 per share. That topped the average analyst estimate of $1.53 per share, according to Thomson Reuters I/B/E/S.
The delay in the Canadian helicopter order boosted earnings by 6 cents per share compared with expectations, the company said.
On a net basis, income fell 29 percent to $1.46 billion due to a big year-earlier gain from the sale of several industrial businesses.
Operating profit rose across all five of business segments.
The company gave other encouraging signs for its aerospace businesses. Orders for Pratt & Whitney engine spare replacement parts rose 20 percent, while such orders increased 19 percent for the aerospace segment that makes other plane components.
"It's nice to see the aftermarket activity picking up," said Peter Arment, an analyst at Sterne Agee. "That's good momentum."
Brian Langenberg, an analyst with independent research firm Langenberg & Co, pointed to strong performance in the segment that includes climate control products. Profit margins in that segment rose to 14.8 percent in the quarter from 11.1 percent a year earlier.
Langenberg also cited an 8 percent increase in orders at its Otis elevators division.
To take advantage of growth in cities in emerging markets, United Technologies last year reorganized its elevator and climate segments under one business.