United Technologies Revenue Climbs -- Update

By Ted Mann and Austen Hufford 

United Technologies Corp. reported higher quarterly sales as the conglomerate makes progress righting its struggling elevator unit and ramping jet engine production to historically high levels.

Net sales rose 1.3% to $14.87 billion, with a 1% increase in organic sales, prompting the company to boost the lower end of its full-year revenue forecast and raise its adjusted earnings per share expectation.

"Based on the first half, we feel very good about the year," Chief Executive Gregory Hayes said on the company's earnings call.

Shares of the company traded 2.5% higher to $107.30 midday.

The strong quarter comes in a tumultuous period for United Technologies, which also makes air conditioners, building controls, and a broad array of aerospace products, from landing gear to evacuation slides. Mr. Hayes warded off a $90 billion takeover bid from rival Honeywell International Inc. earlier in the year.

That takeover attempt came amid Mr. Hayes' own struggle to revive growth at Otis, the legacy elevator and escalator maker that has historically been a font of cash for the conglomerate, but which had been losing market share in China while struggling to bounce back from recession in Europe. At the same time, Pratt is overhauling its manufacturing operation to get a new family of commercial jet engines -- known as the geared turbofan -- off the factory floor and into the air.

The strain of the manufacturing ramp-up continued to weigh on Pratt & Whitney, which saw its operating profit margin decline to 10.1% from 13.2% the previous year, though commercial aftermarket sales were up 20%.

Production hiccups delayed some of the first engine deliveries, causing strain with some customers. Pratt delivered 36 engines in the first half of the year and is on pace to ship a total of 200 by the end of 2016. The pace of first-half shipments was slower than the company projected in March, but in line with its latest agreement with Airbus, Chief Financial Officer Akhil Johri said.

The engine business is "not for the faint of heart," Mr. Hayes said. "Our focus is just on delivering engines, and then servicing them for the next 25 or 30 years."

At Otis, the company is investing in an overhaul of the appearance of elevator cabs. The company will continue to invest around 2% of its sales from its commercial building businesses in research and development, Mr. Hayes said. China was still a drag on Otis in the second quarter, with new equipment orders falling 14%.

At both Otis and Pratt, the company forecasts operating profit will decline in 2016. Still, those results were better than executives feared when they briefed investors in December, Mr. Johri noted in an interview, calling it a "very pleasing first half of the year."

Profit for the period fell to $1.37 billion, down 11% from the prior year. The company raised its guidance for adjusted earnings per share of between $6.45 and $6.60, increasing the low end from $6.30. It expects revenue of $57 billion to $58 billion, up from $56 billion to $58 billion previously.

Write to Ted Mann at [e-mail] and Austen Hufford at [e-mail]

(END) Dow Jones Newswires

July 26, 2016 13:28 ET (17:28 GMT)

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