HARTFORD, Conn. (AP) — United Technologies Corp. reports its first-quarter earnings and revenue before markets open on Tuesday and analysts expect the conglomerate's purchase of aircraft parts maker Goodrich Corp. to begin contributing to higher sales.
WHAT TO WATCH FOR: United Technologies is still integrating last year's $18.4 billion purchase of Goodrich and has sold several companies to raise money and comply with federal regulatory orders intended to promote competition. Discontinued operations have complicated United Technologies' results as it sells non-essential energy and industrial products businesses.
Executives of the Hartford, Conn., manufacturer of military and commercial jet engines, helicopters, elevators and airline parts have told investor analysts that automatic federal budget cuts in effect since March are expected to cut into earnings by 10 cents per share this year. The earnings hit is accounted for in 2013 guidance of $5.85 to $6.15 per share.
Sterne Agee analyst Peter Arment told investors in early April that he expects aerospace companies, including United Technologies, to benefit from rising production, though airlines are pulling back on repair and maintenance to conserve cash. He said the focus remains on 2013 "as a transition year" as United Technologies continues to integrate the Goodrich acquisition.
A short-term view of the first quarter will instead look for economic conditions "turning a corner," Arment said.
United Technologies also has numerous choices in how to use a growing cash reserve. It had $4.82 billion in cash on the balance sheet at the end of 2012, and Chief Financial Officer Greg Hayes has said it will soar to $12 billion with free cash flow and money from divestitures.
The company spent $350 million for buybacks in the first quarter and will likely spend the same in the second quarter, he said.
WHY IT MATTERS: United Technologies, which manufactures jet engines for commercial and military planes, airline parts and building systems components such as heating and cooling equipment, is a bellwether for manufacturing and the residential and commercial real estate markets. Its results also reflect strengths and weaknesses in the U.S., European and Chinese economies. General Electric Co., for example, reported last Friday that its first-quarter results were dragged down by deteriorating economic conditions in Europe.
WHAT'S EXPECTED: Analysts polled by FactSet, on average, expect United Technologies to report earnings of $1.29 per share on revenue of $14.94 billion revenue. Profit would be down slightly from last year's first quarter, but revenue would rise 20 percent.
LAST YEAR'S QUARTER: In last year's first quarter, United Technologies earned $1.31 per share if the businesses that it put up for sale are factored out. Revenue was $12.42 billion.