July 23, 2019 / 11:15 AM / a month ago

United Tech profit beats on aircraft parts demand after MAX grounding

(Reuters) - United Technologies (UTX.N) on Tuesday raised its full-year sales and profit forecasts, aided by an increase in demand for its aircraft maintenance parts and services as airlines grapple with overworked planes due to the grounding of Boeing’s MAX jets.

FILE PHOTO: United Technologies logo is displayed on a screen at the post where it's stock is traded on the floor of the New York Stock Exchange (NYSE) in New York, U.S., September 5, 2017. REUTERS/Brendan McDermid

Shares of UTC, which makes the Pratt & Whitney aircraft engines and is on track to spin off its Otis elevator and Carrier air conditioner units, rose as much as 2.7% in morning trade.

UTC is among the first aero parts supplier to signal gains from the Boeing groundings, which has otherwise rattled the aerospace sector as more than 300 737 MAX passenger planes have been taken out of service, leaving several airlines to deal with thousands of flight cancellations and reschedules.

“There is impetuous on the airlines and the (maintenance and repair) shops to ensure that the existing fleet is in a ready to fly state,” UTC Chief Financial Officer Akhil Johri told Reuters, talking about the MAX grounding.

“In that environment, the (repair) shops and the airlines are ensuring that they have the parts supply available and that is definitely helping (UTC).”

UTC said sales in its Collins aerospace unit, which makes engine components, landing gear, wheels and brakes, and interior and exterior aircraft lighting, surged about 66% percent to $6.58 billion in the second quarter.

The unit is UTC’s biggest and is also benefiting from the acquisition of aero parts maker Rockwell Collins.

Johri added that growth in the unit will slow in the second half compared with the first, as stocking of spare parts by airlines and shops eases with the possibility of MAX returning to the sky.

UTC said it expects its acquisition of Rockwell to add an extra $150 million sales and 15 cents per share to its profit in 2019.

That helped the company raise its current-year adjusted earnings per share outlook to a range of $7.90 to $8.05, from $7.80 to $8.00.

UTC now expects full-year adjusted sales to rise between 4% and 5%, up from 3% and 5% forecast previously.

“The guide was tweaked up more than we had been expecting,” J.P. Morgan analyst Stephen Tusa wrote in a note.

UTC reported earnings per share of $2.20 for the quarter ended June 30, beating the average analyst estimate of $2.05, according to IBES data from Refinitiv.

The company’s net sales rose 17.5% to $19.63 billion, above Wall Street expectation of $19.55 billion.

Reporting by Ankit Ajmera in Bengaluru; Editing by Maju Samuel

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