United Tech details engine problems, affirms 2017 forecast

(Reuters) - United Technologies Corp UTX.N faced new questions about its Geared Turbofan engine on Wednesday, noting problems about durability and with the company's ability to receive parts on time.

The ticker symbol for United Technologies is displayed at the post where it is traded on the floor of the New York Stock Exchange (NYSE) February 23, 2016. REUTERS/Brendan McDermid

The company also reported a fourth-quarter profit in line with analysts’ estimates and backed its 2017 earnings and revenue forecasts.

The new Pratt & Whitney engine, which powers Airbus Group AIR.PA, Bombardier Inc AIR.PA, Embraer SA EMBR3.SA and other jetliners, represents a major investment for United Tech, which also makes Carrier air conditioners and Otis elevators. Its shares were down 2 percent at $109.30 in morning trading.

Chief Executive Officer Greg Hayes said on a conference call with analysts that there had been problems with the engine’s combustor liner in hot climates such as India, and some premature failures of other components.

“These are annoying things for the airlines,” he said. “They obviously cause some disruption.”

But the company had shipped more spare engines and was fixing the problems, he added.

Despite the problems, the company said it expected to deliver 350 to 400 of the engines this year, including about 50 spares.

United Tech also said it still expected 2017 earnings of $6.30 to $6.60 per share, excluding special items, on sales of $57.5 billion to $59.0 billion, forecasts it had first set in December.

“Our growing aerospace backlog and strategic investments in the commercial businesses position us well to generate higher organic growth in 2017,” Hayes said in a statement.

Fourth-quarter net income from continuing operations attributable to shareholders was $1.02 billion, or $1.26 per share, compared with a year-earlier loss of $256 million, or 30 cents per share, that included restructuring and other charges.

Excluding items, earnings of $1.56 per share matched the analysts’ average estimate.

United Technologies, which faces weak demand in China and Europe, said net sales rose 2.5 percent to $14.66 billion, missing analysts’ expectations of $14.70 billion.

Sales at Pratt & Whitney, United Technologies’ second-biggest business, rose nearly 4 percent to $3.99 billion.

The company had increased production of engines for the new Airbus A320neo aircraft after manufacturing problems led to a delivery shortfall in the previous quarter.

At Tuesday’s close, United Tech shares had risen about 8 percent since Donald Trump’s election as U.S. president on Nov. 8 on hopes that the defense sector will benefit from his military spending.

Reporting by Alwyn Scott in Seattle and Rachit Vats in Bengaluru; Editing by Lisa Von Ahn