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United Technologies' (UTX) Q3 Earnings: What's in the Cards?

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United Technologies Corporation is set to release third-quarter 2018 results on Oct 23, before the market opens.

The company reported better-than-expected results in the last four reported quarters, with an average positive earnings surprise of 7.31%. Notably, United Technologies’ earnings of $1.97 per share were above the Zacks Consensus Estimate of $1.85 in the last reported quarter.

Year to date, the company’s shares have increased 1.1%, against 8.8% fall recorded by the industry it belongs to.



Let us see how things are shaping up for United Technologies this quarter.

Factors to Influence Q3 Results

United Technologies is well placed to benefit from healthy demand from end markets served as well as initiatives to innovative products and reduce costs. Also, an increasing urban population, hike in the share of middle-class in total population, increase in revenue passenger miles and digital initiatives — undertaken to improve services, customer experience, labor productivity and effective maintenance — are positives. Additionally, buyouts of Rockwell Collins, when completed, will bring in costs synergies.

The company does not provide quarterly projections. However, a look at its annual forecast will fairly provide a picture for the to-be reported quarter. For 2018, the company anticipates adjusted earnings within $7.10-$7.25, higher than the previous forecast of $6.95-$7.15. Revenues are projected at $63.5-$64.5 billion, up from the earlier forecast of $63-$64.5 billion. Organic sales will likely grow 5-6% versus 4-6% predicted earlier.

For Otis, order growth in new equipment, service transformation efforts, increased innovation and operational excellence will be tailwinds. Revenues are predicted to be up low-to mid-single digits. However, operating results will receive a setback from increasing input costs, one-time charges incurred and forex issues. The Zacks Consensus Estimate for revenues for the third quarter of 2018 has increased 2% year over year to $3,220 million, while that for operating profits has fallen 4.3% to $537 million.

For UTC Climate Control and Security, new products will mainly drive organic sales growth. Total revenues are projected to increase in mid-single digits. Operating results will be driven by higher volumes and effective pricing actions. However, higher input costs, forex issues and Taylor divestment might limit operating results growth. The Zacks Consensus Estimate for revenues for the third quarter of 2018 has increased 2.1% year over year to $4,785 million while that for operating profits has fallen 4.6% to $831 million.

For Pratt & Whitney, rising deliveries of new engines will benefit sales while anticipation of negative engine margin will adversely impact operating results. The company anticipates sales to rise in low teens in 2018. The Zacks Consensus Estimate for revenues for the third quarter of 2018 has increased 11.1% year over year to $4,300 million, while that for operating profits has fallen 18.4% to $345 million.

For UTC Aerospace Systems, robust commercial aftermarket business will drive revenues while operating results might face headwinds from forex woes and impact from new programs and tailwinds from the company cost-reduction initiatives. Sales are projected to grow in low- to mid-single digits. The Zacks Consensus Estimate for revenues for the third quarter of 2018 has increased 1.7% year over year to $3,700 million, while that for operating profits has fallen 5.1% to $601 million.

Earnings Whisper

Our proven model provides some idea on the stocks that are about to release their earnings results. Per the model, a stock needs to have a combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for likely earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The case with United Technologies is given below.

Earnings ESP: Earnings ESP of United Technologies is currently -0.03%. The Zacks Consensus Estimate for the quarter is $1.81.

United Technologies Corporation Price, Consensus and EPS Surprise
 

United Technologies Corporation Price, Consensus and EPS Surprise | United Technologies Corporation Quote

Zacks Rank: United Technologies currently carries a Zacks Rank #2. This combined with a negative ESP makes earnings surprise prediction difficult.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here is one company, ITT Inc. (ITT - Free Report) , in the industry that you may want to consider as our model shows these have the right combination of elements to post an earnings beat this quarter. ITT currently carries a Zacks Rank #3 and has an Earnings ESP of +0.65%.

Two other companies, in the Zacks Industrial Products sector, that are likely to post upbeat earnings results this quarter are Tetra Tech, Inc. (TTEK - Free Report) and Flowserve Corporation (FLS - Free Report) .   

Tetra Tech sports a Zacks Rank #1 and has an Earnings ESP of +0.96%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Flowserve carries a Zacks Rank #2 and has an Earnings ESP of +1.72%.

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