- The Washington Times - Tuesday, April 21, 2009

HARTFORD, CONN. (AP) - United Technologies Corp. said Tuesday its first-quarter profit fell 28 percent, as frail construction markets dragged down orders for its Otis elevators and Carrier heating and ventilation systems.

Results were weak across the board, and included charges for layoffs and other cost-cutting measures designed to help the company weather a brutal market, where demand is down for many of its big-ticket goods.

Despite the anemic results, the company, which also makes Pratt & Whitney jet engines and Sikorsky helicopters, backed an earlier profit forecast for the year. Chief Financial Officer Greg Hayes told analysts that United Technologies should still meet its guidance because it has a contingency of $350 million to cover higher costs if revenue continues to slide.

United Technologies last month lowered its 2009 profit forecast and announced thousands of job cuts in its administrative and sales departments, a response to the rapidly deteriorating economy since it had issued its previous outlook in December.

For the quarter, net income attributable to common shareholders fell to $722 million, or 78 cents per share, from $1 billion, or $1.03 per share, in the same period last year. The latest quarter’s results include 12 cents per share in restructuring costs and a tax benefit of 3 cents per share.

Revenue fell to $12.2 billion from $14 billion.

Analysts surveyed by Thomson Reuters expected earnings of 78 cents per share. Those estimates typically exclude one-time items.

Analyst Rick Whittington of JSA Research called the results “respectable under the circumstances,” which he said were enough to cheer investors.

And he said United Technologies reassured investors by reiterating its revenue guidance of $55 billion and earnings forecast of $4 to $4.50 per share for the full year.

“This would have been the quarter the wheels are falling off the bus and it didn’t,” he said. “It’s not a spectacular report. The Carrier and Otis order reports are weak, yet they’re not zero.”

Declines were led by Carrier, with profit plunging to $22 million from $248 million. Carrier was among the first United Technologies units to feel the impact of the housing downturn beginning last year and has also been hurt by falling demand for refrigerated transportation.

Meanwhile, profit at Otis elevator fell to $506 million from $580 million, though Hayes told analysts in a conference call Tuesday that increased spending in China could help boost business. Orders for Otis elevator have declined as China’s construction boom slowed.

Conversely, operating profit at Sikorsky jumped 42 percent to $116 million. Results were helped by strong military orders as the Obama administration moves more troops into Afghanistan, increasing the reliance on helicopters for troop movements and other activities.

Hayes said that although order rates continue to be down, they are stabilizing, particularly in China, which is starting to see some benefits from a stimulus program equal to $586 billion.

United Technologies also said its previously announced restructuring, which will result in 11,600 job cuts, is under way. The move will yield savings of $250 million this year and $350 million in 2010, the company says.

A pair of analysts said investors were relieved that the results were not worse.

Analyst Rick Whittington of JSA Research called the results “respectable under the circumstances.” He added United Technologies reassured investors by reiterating its revenue guidance of $55 billion and earnings forecast of $4 to $4.50 per share for the full year.

Analyst Nicholas P. Heymann of Sterne Agee said investors are confident that Louis Chenevert, who is beginning his second year as chief executive, knows how to lead the conglomerate through the worst recession in decades.

“There was too much skepticism that the new crew can’t drive the rig. I think it was allayed today,” Heymann said.

Shares of the Hartford, Conn.-based company rose $2.18, or 4.8 percent, to close at $47.99.

Several United Technologies businesses are poised to do well regardless of how long it takes for the economy to improve, Heymann said. For example, Hamilton Sundstrand should profit from its auxiliary and environmental control systems and other parts on the Boeing 787 when production ramps up.

And United Technologies has aggressively pursued cost savings for years by moving manufacturing to low-cost, modern plants in eastern Europe, he said.

“While it’s certainly challenging, particularly at Otis and Carrier, it’s not like they’re not doing anything about it,” Heymann said.

Akhil Johri, vice president of investor relations, told analysts in an earnings conference call that Pratt & Whitney Canada, which makes engines for corporate jets, is continuing to cut its production schedules. Pratt & Whitney has been affected by the downturn in the airline industry and huge cuts in business jet orders.

United Technologies now expects engine shipments to slide by a percentage in the double digits this year, compared with a previous forecast for flat shipments. Pratt & Whitney’s 2009 operating results will likely be at the lower end of a guidance range of flat to down $50 million compared with 2008, he said.

The jet engine-maker also could be hurt by the Pentagon’s proposal to halt production of the F-22 fighter jet after the 187 planes already planned.

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