This is a summary of the second quarter fiscal 2008 earnings call conducted by United Technologies Corp.(UTX) on July 17, 2008
Management:
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President, CEO: Louis Chênevert
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VP, Accounting & Finance: Gregory J. Hayes
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VP, Finance: James E. Geisler
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VP, IR: Akhil Johri
Key investor issues:
- Revenues increased 13% to $15.7 billion, including 6% organic growth.
- Earnings were $1.3 billion or $1.32 a share, up 11% over last year.
- The company repurchased $719 million shares bringing the year-to-date total to over $1.5 billion.
Second Quarter Highlights:
Revenues were up 13% to $15.7 billion with six points of organic revenue growth.
- Foreign exchange generated a net 4 cents benefit driven by positive impact from the euro and other currencies.
- Geographically revenues increased 19% led by double-digit growth in North America and Russia and China reflecting the strong new equipment backlog entering the year.
- Acquisitions accounted for the remainder of the revenue growth.
- Free cash flow came in at 87% of net income, primarily due to Carrier seasonality.
- Cash flow from operations was $1.4 billion and capital expenditures were $305 million.
Analysis by Product Segment:
- In Europe, new equipment orders at both companies were strong with Otis 23% including double digit growth in North America, Europe and China.
- Operating profit grew 25% as foreign exchange contributed approximately half of the improvement in revenues and profit.
- Operating margin expanded by 90 basis points to 19.8%.
- Carrier''s commercial HVAC business grew 12% in Europe. Refrigeration orders at Carrier in North America and Europe.
Operating profit increased 9% on 7% higher revenue and foreign exchange contributed about five points of revenue growth and six points of the profit growth.
- Otis new equipment orders were up 23% reflecting double-digit increases in all geographic areas.
- Operating margin expanded 10 basis points to 12.2% benefiting from product cost reduction and prior restructuring action in the commercial HVAC.
Fire & Security:
- Revenue grew 29% with acquisitions contributing 18 points and foreign exchange seven points of this growth.
- Organic growth was 4% with the fire safety businesses in Europe and the Americas up mid single-digits.
- Operating profit increased 46% with foreign exchange contributing eight points of the growth.
- Operating margin expanded 100 basis points to 8.8%.
Aerospace businesses:
- Pratt & Whitney revenues increased 6% led by continued engine volume growth at Pratt & Whitney Canada.
- Revenues improved over 20% at Pratt Canada, revenues at Pratt & Whitney Rocketdyne and Power Systems also grew over 10%, while military revenues are essentially flat.
- Large commercial engine aftermarket grew low single-digit with spares [ph] about flat.
- Operating profit improved 6% led by the military business on favorable aftermarket performance and improved engine mix.
Hamilton Sundstrand revenues were up 18%, with aerospace OEM and industrial businesses up nearly 20% each.
- Commercial aftermarket revenues were up double-digit while operating profit grew 11%.
- At Sikorsky operating profit grew 28% on 9% higher revenues.
- Operating margin expanded 120 basis points to 8.5% from higher military volume and favorable mix.
- During the quarter, Sikorsky shipped a total of 53 large helicopters; 37 military and 16 commercial.
Business outlook:
- Sikorsky to get mid-teens revenue growth, with operating profit up approximately 25% for the whole year.
- Earnings guidance for the full year to be in the range of $4.80 to $4.95 a share.
- Share repurchases to exceed the $2 billion guidance.
