United Technologies Corporation reported better-than-expected fourth-quarter 2019 results. Quarterly adjusted earnings came in at $1.94 per share, surpassing the Zacks Consensus Estimate of $1.84. However, the bottom line was lower than the year-ago figure of $1.95.
The company reported adjusted earnings of $8.26 for 2019, an increase of 8.5% from the prior year.
In the fourth quarter, revenues came in at $19,551 million, up 8.4% year over year. The top line also outpaced the consensus estimate of $19,424 million. The rise was driven by 1% contribution from organic sales growth and 8% positive impact of acquisitions, partially offset by 1% negative impact of currency translation.
In 2019, the company reported total revenues of $77,046 million compared with $66,501 million in the previous year.
Otis’ revenues for the reported quarter were $3,362 million, up 1.9% year over year. Aggregate sales for Carrier totaled $4,501 million, down 2.8%. Pratt & Whitney’s fourth-quarter revenues were $5,642 million, up 1.8% while the same for Collins Aerospace Systems surged 31.5% to $6,444 million.
Costs and Margins
Cost of products and services sold during the fourth quarter was $14,734 million, up 7.2% year over year.
Selling, general and administrative expenses jumped 20.8% to $2,314 million.
Adjusted operating profit margin was 13.1%, up 60 basis points.
Balance Sheet/Cash Flow
Exiting the fourth quarter, United Technologies had cash and cash equivalents of $7,378 million, up from $6,152 million on Dec 31, 2018. Long-term debt was $37,788 million, down from $41,192 million recorded at the end of 2018.
During the quarter, the company generated $2,782 million cash from operating activities compared with $2,005 million a year ago. Its capital expenditures were up 15% to $897 million.
United Technologies is poised to grow on the back of strength in its aerospace business, cost reduction and operational excellence initiatives. The Rockwell Collins acquisition (closed in November 2018) is not only expected to fortify the company's existing product portfolio but also aid in launching innovative solutions for aerospace customers. The company remains on track to separate its existing businesses into three entities, which is likely to be completed by the first half of 2020.
For 2020, the company estimates Pratt & Whitney segment’s sales to be up in the mid-single digit range, while Collins Aerospace segment’s sales are projected to decline in low single digit.
Adjusted operating profit for Pratt & Whitney is estimated to rise the range of $225-$275 million from its reported figure in 2019. Collins Aerospace segment’s adjusted operating profit is projected to decline in the range of $275-$325 million from 2019.
Zacks Rank & Stocks to Consider
United Technologies currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks are Cintas Corporation CTAS, Emerson Electric Co. EMR and Crane Company CR. All these companies carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Cintas delivered positive earnings surprise of 8.50%, on average, in the trailing four quarters.
Emerson delivered positive earnings surprise of 3.03%, on average, in the trailing four quarters.
Crane’s delivered a positive earnings surprise of 0.64% in the last reported quarter.
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