United Technologies, (UTX – Free United Technologies Stock Report) a diversified industrial company that makes everything from jet engines to escalators, has reported first-quarter financials for the period ending March 31, 2019. Results beat expectations in terms of both revenues and earnings, and management raised the lower end of its full-year share-net guidance. On the heels of these positives, the stock was up more than 3% in value in early morning trading. Today's rise in price pushes the year-to-date increase in UTX's quotation north of 30% as we approach the one-third mark of 2019.
The top line for the three-month window clocked in at $18.37 billion, which compares favorably to our $18.01 billion call and the $15.24 billion registered in the first quarter of last year. The Rockwell Collins acquisition was the primary revenue driver during the period, with organic growth also coming in at an impressive 8% year over year. Collins Aerospace, the new division created after the aforementioned purchase, saw its commercial aftermarket revenues jump 64% (9% organically), while the Pratt & Whitney jet arm put up a commercial aftermaket top-line gain of 1%. That figure is not all that great, but P&W leadership anticipates the full-year number will be in the mid-single digits. Elsewhere, first-quarter equipment orders at the Carrier branch slipped 2%, versus a 10% gain in the year-earlier period. That metric fell 1% at the Otis elevator department.
From an earnings perspective, share net totaled $1.91 in the first quarter, beating the consensus by roughly $0.20 and topping our $1.75 expectation. This figure becomes even more formidable when factoring in the integration costs that UTX has taken on of late, coupled with the spending that has been earmarked to facilitate next year's planned breakup of the company.
With regard to that plan, management reiterated that the three-way separation appears set to occur in the first half of 2020, so we are looking at a timeframe of about one year from the present day. This clarity likely pleased the investment community, as initially leadership appeared to be in no rush to undertake the venture, and the share price took a hit as a result. To recap, Otis and Carrier will be spunoff as their own standalone entities, while Pratt & Whitney will be joined with Collins Aerospace to form the new UTX, which would have annual revenues of roughly $36 billion using 2018 figures.
For the balance of 2019, management has confirmed its top-line target for revenues between $75.5 billion and $77.0 billion. Also, the share-net guidance bracket was firmed up on the lower side to a spread of $7.80 to $8.00. It was $7.70 to $8.00 to start this year. In turn, we are adding a dime to our earnings call, which now stands at the apex of the provided range, or $8.00. Further, our revenue estimate for 2019 is being lifted to $77.5 billion to factor in the first-quarter outperformance, as well as management's penchant to set the bar a bit low.
So should investors hop on board this industrial conglomerate at this time? Our current answer to that would be no. With the stock now trading above the $140-a-share mark, appreciation potential three to five years hence is subpar. Too, at this lofty quotation, the dividend yield has fallen a tick below the Value Line average. Finances are strong and we like the top ranking (1: Highest) for Safety, but all the good news above looks to be already baked into the stock price. We advise subscribers to await a better entry point.
About The Company: United Technologies operates in four business segments: Pratt & Whitney makes and services aircraft engines; Otis manufactures and services elevators; UTC Climate, Controls & Security makes heating, ventilating, and air-conditioning equipment; and UTC Aerospace Systems produces aerospace and industrial products.
- Erik M. Manning
