United Technologies Corp. (NYSE: UTX) reported fourth quarter and full year 2017 results above expectations and expects continued growth in 2018. In a conference call with investors and analysts today, Chairman and Chief Executive Officer Gregory Hayes will discuss the 2017 results and the company’s expectations for 2018.
“UTC had a strong finish to 2017,” said Hayes. “Sales, adjusted EPS and free cash flow were all above the top end of our expectations. Our focus on innovation, execution and cost reduction led to our best year of organic sales growth since 2014, with all businesses contributing.
We gained share in our commercial businesses and continued to execute on our growing aerospace backlog. UTC also announced the transformative Rockwell Collins acquisition which will create a premier aerospace supplier. As a result of this proposed transaction, together with the investments in our businesses and in our digital strategies, we are positioned well for years to come.”
Hayes continued, “In 2018, we expect accelerating organic sales and adjusted earnings per share growth along with strong cash generation.”
GAAP EPS was $0.50 (down from $1.26 in the fourth quarter of 2016) and included 90 cents for a charge related to tax law changes and 20 cents of net restructuring and other significant items. Associated with the tax law change is an estimated, cumulative net cash payment of $1.5 billion to be paid through 2026. Adjusted EPS of $1.60 was up 3 percent versus the prior year.
Each of United Technologies’ businesses grew sales in the fourth quarter. Commercial aftermarket sales were up 25 percent at Pratt & Whitney, and up 10 percent at UTC Aerospace Systems. Otis new equipment orders increased 1 percent versus the prior year at constant currency, with solid growth in the U.S. and Europe and continued pricing pressure in China. Equipment orders at UTC Climate, Controls & Security increased 9 percent organically.
Full year sales of $59.8 billion were up 5 percent versus the prior year with 4 points of organic sales growth and 1 point of net acquisitions impact.
Full year 2017 GAAP EPS of $5.70 was down 7 percent versus prior year. 2017 results included 90 cents for the fourth quarter tax charge and 5 cents of net restructuring and other significant items, as compared with 48 cents in 2016. Adjusted EPS of $6.65 increased 1 percent year over year. Net income for the year was $4.6 billion, down 10 percent versus the prior year. Cash flow from operations for the year was $5.6 billion and capital expenditures were $2.0 billion.
In 2017, United Technologies invested in digital initiatives to drive operational efficiency and generate long-term value for its customers. Investments included the United Technologies Digital Accelerator, new digital solutions within UTC Climate, Controls & Security, and new tools for more than 15,000 Otis technicians worldwide. Pratt & Whitney’s Geared Turbofan™ Engine was selected to power Delta Air Lines’ order of 100 A321neo aircraft. Additionally, the proposed acquisition of Rockwell Collins, announced in 2017, will lead to a new era of innovative aerospace products and solutions for UTC’s customers.
UTC provides the following 2018 outlook (excluding the impact of the proposed Rockwell Collins acquisition):
Adjusted EPS of $6.85 to $7.10*;
Total sales of $62.5 to $64.0 billion, including organic sales growth of 4 to 6 percent*;
Free cash flow in the range of $4.5 to $5.0 billion.*
“Our outlook demonstrates how our strategic investments are paying off,” said Hayes. “We are innovating for growth and expect all of our businesses to grow sales and earnings in 2018.”
As a global technology company delivering essential products and services for a better life, United Technologies’ businesses are well aligned with the world’s megatrends, such as urbanization, digitization, and an expanding middle class. These advantages, combined with an improving global macro-economic environment, solidify the company’s confidence in generating sustained value creation.
