UTC Reports Third Quarter EPS From Continuing Operations of $1.37;

Earnings per share of $1.37 and net income attributable to common shareowners of $1.2 billion were down 4 percent and 3 percent, respectively, over the year ago quarter. Results for the current quarter include $0.09 per share of restructuring costs, offset by $0.09 of favorable one-time items. Earnings per share in the year ago quarter included $0.06 of restructuring costs, partially offset by $0.04 per share of net favorable one-time items. Before these items, earnings per share decreased 6 percent year over year. 

The effective tax rate for the quarter was 26.6 percent. Foreign currency translation, and hedges at Pratt & Whitney Canada, had an adverse impact of $0.07.

The acquisition of Rolls-Royce’s share of the International Aero Engines joint venture closed on June 29 and provided $0.03 of EPS accretion in the quarter. Net of transaction and financing costs, the acquisition of Goodrich Corporation, which closed on July 26, did not have an impact on EPS.

“The integration of Goodrich and IAE is off to a good start with solid underlying performance at both businesses,” said Louis Chênevert, UTC Chairman & Chief Executive Officer. “We now expect just $0.10 of EPS dilution from the Goodrich acquisition in 2012 versus our prior estimate of $0.20.”

Sales for the quarter of $15.0 billion were 6 percent above prior year. Net acquisitions provided 11 points of growth. Organic sales decreased 2 percent over the year ago quarter and foreign currency translation also had an adverse impact of 3 points. Third quarter segment operating margin at 14.2 percent was 160 basis points lower than prior year. Adjusted for restructuring costs and net one-time items, segment operating margin at 15.0 percent was 100 basis points lower than prior year, including the impact from the Goodrich acquisition. Research and development costs increased $125 million in the quarter to $590 million, including $101 million at Goodrich. Cash flow from operations was $1.6 billion and, less capital expenditures of $317 million, exceeded net income attributable to common shareowners.

“We expect earnings per share of $5.25 to $5.35 for 2012. Faced with a challenging economic environment, we are increasing our investment in restructuring this year to $600 million, up from our prior plan of $500 million, and continue to expect net one-time gains of $600 million,” Chênevert added. “Strong cash flow is a hallmark of UTC, and we now expect free cash flow to exceed net income for the full year.”

New equipment orders at Otis were up 7 percent over the year ago third quarter, including unfavorable foreign exchange of 4 percentage points. North American Residential HVAC new equipment orders at UTC Climate, Controls & Security grew 3 percent. Commercial spares orders were up 14 percent at Pratt & Whitney’s large engine business including the impact from the incremental IAE share. Organically, commercial spares orders were down 21 percent at Pratt & Whitney and down 6 percent at UTC Aerospace Systems.

“Due to the lack of recovery in the commercial aerospace aftermarket and continued uncertainty in the global economy, we now expect 2012 sales of $58 billion,” Chênevert added. “The portfolio transformation is substantially complete, and we are focused on integration and execution.”

As previously announced, the company does not anticipate share repurchase in 2012 due to the Goodrich transaction. UTC expects a full year effective tax rate of 29 percent excluding one-time items, down from the prior estimate of 29.5 percent.

Earnings per share from discontinued operations were $0.19 in the quarter. Results included $127 million of positive income tax adjustments associated with the legacy Hamilton Sundstrand Industrials businesses.

Source and photo: United Technologies