United Technologies Corporation (UTX - Free Report) reported better-than-expected results for fourth-quarter 2018.
Earnings and Revenues
Quarterly adjusted earnings came in at $1.95 per share, surpassing the Zacks Consensus Estimate of $1.51. The bottom line also came in higher than the year-ago figure of $1.60 per share.
Notably, the company reported adjusted earnings of $7.61 for 2018, an increase of 14.4% from the prior year.
Revenues in the reported quarter came in at $18,044 million, up 15.1% year over year. The top line also outpaced the Zacks Consensus Estimate of $16,789 million. The improvement was driven by 11% contribution from organic sales growth and 4% positive impact of acquisitions, partially offset by 1% negative impact of currency translation.
For 2018, the company reported total revenues of $66,501 million compared with $59,837 million in the previous year.
Otis’ revenues in the reported quarter were $3,300 million, up 1.5% year over year. Aggregate sales of the Carrier segment increased 2.5% to $4,631 million. Pratt & Whitney’s fourth-quarter revenues came in at $5,543 million, up 24.3% from the year-ago quarter. The top-line performance of the Collins Aerospace Systems improved 28.8% to $4,900 million.
Notably, the company recently worked on its portfolio restructuring initiative. The acquired Rockwell Collins assets and United Technologies’ UTC Aerospace Systems have formed a new unit — Collins Aerospace Systems.
In addition, the company intends to divide its businesses into three independent companies — United Technologies, Otis and Carrier.
Costs and Margins
Cost of products and services sold during the December-end quarter was $13,747 million, up 16.5% year over year.
Selling, general and administrative expenses in the fourth quarter flared up 11.3% year over year to $1,915 million.
Adjusted operating margin in the quarter was 12.5%, down 110 basis points from the year-ago figure.
Balance Sheet/Cash Flow
United Technologies exited 2018 with cash and cash equivalents of $6,152 million compared with $8,985 million of the previous year. Long-term debt was $41,192 million compared with $24,989 million in the previous year.
For 2018, the company generated net cash of $6,322 million from its operating activities, down from $5,631 million recorded a year ago. The company’s capital expenditures were down 2.5% to $780 million.
United Technologies is poised to grow on the back of continued investments, stronger end-market demand and strategic cost-reduction efforts. Backed by these positives, the company has given bullish full-year 2019 earnings guidance. Adjusted earnings are currently anticipated to lie within the $7.70-$8.00 per share range. Additionally, the company has given revenue guidance for 2019 between $75.5 billion and $77 billion (estimating organic growth of 3-5% year over year).
The acquisition of Rockwell Collins (completed in November 2018) is not only expected to fortify the company's existing product portfolio but also aid in launching innovative solutions for the aerospace customers. United Technologies expects the acquisition to be accretive to its adjusted earnings per share in 2019, with cost synergies of at least $500 million by the fourth year of the completion of the buyout.
Zacks Rank & Key Picks
United Technologies currently carries a Zacks Rank #3(Hold).
Some better-ranked stocks in the same space are Hitachi Ltd. (HTHIY - Free Report) , Carlisle Companies Incorporated (CSL - Free Report) and HC2 Holdings, Inc. (HCHC - Free Report) . While Hitachi sports a Zacks Rank #1 (Strong Buy), Carlisle and HC2 Holdings carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Hitachi delivered average earnings surprise of 55.51% in the trailing four quarters.
Carlisle pulled off average positive earnings surprise of 11.90% in the trailing four quarters.
HC2 Holdings outpaced estimates in the last reported quarter by 111.90%.
Zacks' Top 10 Stocks for 2019
In addition to the stocks discussed above, wouldn't you like to know about our 10 finest buy-and-holds for the year?
From more than 4,000 companies covered by the Zacks Rank, these 10 were picked by a process that consistently beats the market. Even during 2018 while the market dropped -5.2%, our Top 10s were up well into double-digits. And during bullish 2012 – 2017, they soared far above the market's +126.3%, reaching +181.9%.
This year, the portfolio features a player that thrives on volatility, an AI comer, and a dynamic tech company that helps doctors deliver better patient outcomes at lower costs.
See Stocks Today >>