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United Technologies Cuts 2012 Profit Forecast Amid Slowdown

Thursday, 26 July 2012 02:31 PM

United Technologies Corp. cut its annual profit forecast as demand for Otis elevators and spare parts for Pratt & Whitney jet engines declined amid a slump in the global economy.

United Technologies expects earnings this year of $5.25 to $5.35 a share, the Hartford, Connecticut-based company said in a statement. That compares with a previous forecast of $5.30 and $5.50 and an average analyst estimate of $5.45.

Chief Executive Officer Louis Chenevert is grappling with lower demand from airlines and commercial builders as evidence mounts that the U.S., Europe and China are struggling to maintain their economic footing. He’s expanding in aerospace with the $16.5 billion Goodrich deal, which the company said should obtain regulatory approval today and close by week’s end.

“Once they get Goodrich feathered in, they should have the decks cleared for a very strong 2013,” Richard Whittington, an analyst at Drexel Hamilton LLC in New York, said in a telephone interview. “Next year remains the target year for them, while 2012 has been so consternating that the reduced guidance is almost somewhat anticlimactic.”

To help finance the Goodrich acquisition, United Technologies this week said it agreed to sell its Rocketdyne unit to GenCorp Inc. for $550 million and Hamilton Sundstrand’s pump and compressor businesses to Carlyle Group LP and BC Partners for $3.46 billion.

Euro Exchange

United Technologies cut its 2012 revenue forecast to $58 billion to $59 billion, from as much as $62 billion, Chenevert said in the statement. The company expects the euro to trade at about $1.20 for the rest of this year, compared with a March projection of $1.35.

The company’s forecast was cut “in light of the slowing global economy,” the decline in the euro and the late-July closing of the Goodrich purchase, Chenevert said in the statement.

The shares fell 0.3 percent to $72.40 at 8:12 a.m., before the start of regular trading in New York.

New equipment orders at Otis fell 7 percent from a year earlier, while demand for spare parts for Pratt & Whitney jets declined 15 percent, United Technologies said. Restructuring costs this year will be $500 million, versus an earlier forecast of $450 million.

Earnings from continuing operations climbed to $1.47 billion, or $1.62 a share, the company said in the statement. That compares with analysts’ estimates of $1.42 a share.

Results for the quarter included a $179 million pre-tax charge following a decision to dispose of the company’s UTC Power fuel cell business, according to financial tables posted on its web site. Chief Financial Officer Greg Hayes said the company was “looking at strategic alternatives” for the unit during a meeting with analysts and investors last month.

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Thursday, 26 July 2012 02:31 PM
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