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United Technologies (UTX) Down 5.2% Since Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for United Technologies Corporation (UTX - Free Report) . Shares have lost about 5.2% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

United Technologies Tops Q2 Earnings, Lifts 2017 View

United Technologies reported better-than-expected results in second-quarter 2017.

Earnings and Revenues

Quarterly adjusted earnings from continuing operations came in at $1.85 per share, beating the Zacks Consensus Estimate of $1.77. The bottom line also came in 1.6% higher than the year-ago tally. The upside was driven by solid organic sales and acquisition-based growth.

Net sales in the reported quarter came in at $15.28 billion, outpacing the Zacks Consensus Estimate of $15.18 billion. In addition, the top line came in 2.7% higher than the prior-year figure.  

Segmental Details

United Technologies generates revenues from four segments:

Net sales of Otis were $3,131 million, up 1.1% year over year.

Aggregate quarterly revenues of UTC Climate, Controls & Security came in at $4,712 million, up 5.7% year over year.

Pratt & Whitney revenues were $4,070 million, up 6.7% year over year.

Sales of UTC Aerospace Systems in the quarter came in at $3,640 million, down 2% year over year.

Costs and Margins

Cost of goods sold in second-quarter 2017 was $11.1 billion as against $10.7 billion recorded in the comparable period last year. Selling, general and administrative expenses came in at $1,538 million, up 6% year over year.

Operating profit margin was 15%, down 70 basis points (bps) year over year.

Balance Sheet and Cash Flow

United Technologies exited the second quarter with cash and cash equivalents of $9,345 million, higher than $7,157 million recorded at the end of 2016. Long-term debt was $23,883 million, up from $21,697 million as of Dec 31, 2016.

In first-half 2017, United Technologies generated net cash of $3,139 million from its operating activities, up from $2,606 million recorded in the year-ago period. Capital spent on additions of property, plant and equipment totaled $771 million, up 18.8% year over year.

Outlook

United Technologies is poised to grow on the back of innovation investments, robust backlog and strategic cost-reduction efforts. Backed by these positives, the company raised the lower end of its full-year 2017 earnings guidance. Adjusted earnings are currently anticipated to lie within the $6.45–$6.60 per share range, as against the previously estimated range of $6.30−$6.60.  Additionally, the company lifted its revenue guidance for 2017 from the previous projection of $57.5–$59 billion to $58.5–$59.5 billion (estimating an organic growth of 3–4% year over year).

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last one month period as none of them issued any earnings estimate revisions.

VGM Scores

At this time, United Technologies' stock has an average Growth Score of C, however its Momentum is doing a lot better with a A. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is more suitable for momentum investors than those looking for value and growth.

Outlook

The stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.




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