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UTX's Muted 2014 Outlook Drags Share Prices

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Diversified business conglomerate United Technologies Corp. (UTX - Free Report) offered a muted outlook for 2014 at an investor and analyst meeting on Wednesday. The muted outlook was largely due to modest improvements in the global economy and stabilization in European markets. Although the stock was up 32.2% till Dec 11, 2013 (the day before United Technologies issued the guidance), share prices fell by 1.1% in after-market trading on the following day as a possible aftermath of the subdued fiscal view.

While reiterating its revenue expectations for 2013 at $63 billion, United Technologies stressed that its earnings will come at $6.15 per share, which is at the higher end of its previous earnings guidance of $6.10 - $6.15. The current Zacks Consensus Estimate for 2013 is also pegged in unison at $6.15.

Management further observed that the company recorded a solid performance in 2013 with a diligent execution of its operating plans that enabled it to register about 15% growth in earnings despite a challenging macroeconomic environment. A strong order backlog and modest strides in global economy has given an added confidence to United Technologies to expect this growth to continue in 2014 with positive results across most of its businesses although at a reduced pace.

Management noted that United Technologies has largely benefited from two global trends, namely increased urbanization and spurt in commercial flight. However, at the same breath, management opined that the company’s military business could be adversely affected, albeit at a lesser pace, with spending cuts on federal projects as part of the U.S. government’s sequestration program.

In 2014, United Technologies anticipates earnings in the range of $6.55 to $6.85 per share on revenues of $64 billion. This represents an earnings growth of 7%-11%, which is much lesser than that of the current year. The Zacks Consensus Estimate for 2014 is pegged on the higher side at $6.83. The company has earmarked $1 billion each for share repurchases and acquisitions in 2014, while capital expenditures are expected to aggregate $2 billion on increased spending for aerospace production equipment.

Moving forward, United Technologies expects to deliver sustained value to its customers through continued investments in innovative products and securing orders that will drive top-line growth. Also, the company expects to witness revenue synergies from the acquisitions of Goodrich and IAE in the long term.

Based in Hartford, CT, United Technologies provides high-end technology products and services to the building systems and aerospace industries worldwide. The company serves various end markets such as aerospace, defense and commercial construction. The business diversification allows United Technologies to remain profitable amid tough economic times.

The operations of the company are primarily classified into two principal businesses: commercial and aerospace. Under its commercial business, the company has Otis and the UTC Climate, Controls & Security division, which combined the former Carrier and UTC Fire & Security divisions. The aerospace business of the company consists of Sikorsky aircraft and the UTC Propulsion & Aerospace Systems, which includes UTC Aerospace Systems and Pratt & Whitney divisions.

United Technologies presently has a Zacks Rank #3 (Hold). Other notable companies in the industry include ITT Corp. (ITT - Free Report) , Hutchison Whampoa Ltd. , and Raven Industries Inc. (RAVN - Free Report) , each carrying a Zacks Rank #2 (Buy).

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