Another round of initial quarterly revenue from its Rockwell Collins Inc. megadeal lifted United Technologies Corp. to a 3.8% increase in first-quarter net income to $1.35 billion.
UTC completed the $30 billion deal for Rockwell on Nov. 27, which included assuming $7 billion in Rockwell debt. It inherited about 1,500 employees in Winston-Salem and has about 2,500 overall in North Carolina.
Adjusted net income was $1.65 billion, up 15.9%, which represented several restructuring, income-tax and merger-related costs.
Diluted earnings were $1.56 a share, down 6 cents. Adjusted earnings were $1.91, up 14 cents.
The average earnings forecast was $1.75 by five analysts surveyed by Zacks Investment Research. Analysts typically do not include one-time gains and charges in their forecasts.
The company had $112 million in restructuring costs, of which $39 million was linked to the Collins Aerospace Systems division formed from combining Rockwell and UTC Aerospace. There was $55 million in expenses associated with the planned May 2020 spin-off of its Carrier and Otis divisions.
Otis is the world’s leading manufacturer of elevators, escalators and moving walkways. Carrier is a global provider of HVAC, refrigeration, building automation, fire safety and security products.
“Sales were up 20 percent with all four businesses contributing to the robust 8 percent organic growth in the quarter," Gregory Hayes, UTC’s chairman and chief executive, said in a statement.
"Earnings and cash flow exceeded our expectations for the quarter, reinforcing our confidence in the full-year financial outlook, including our improved adjusted EPS range of $7.80 to $8.00.” The company raised the lower end of its earnings guidance by 10 cents.
"We saw excellent performance from the combined Collins Aerospace business.
"Preparations for our portfolio separation are progressing well, and we remain on track to establish Otis and Carrier as independent companies," Hayes said.
The company maintained fiscal 2019 guidance for sales in the range of $75.5 billion to $77 billion, representing organic growth of 3% to 5%.
Net sales for the quarter were $18.4 billion, up 20.5%. UTC’s income-tax expense was $397 million, down from $522 million a year ago.
UTC has four main operating segments: Collins Aerospace Systems had $6.5 billion, up 70.6%; Pratt & Whitney had $4.82 billion, up 11.3%; Carrier had $4.32 billion, down 1.2%; and Otis had $3.09 billion, up 1.9%.
Noah Poponak, an analyst with Goldman Sachs, said organic revenue growth of 8% in the quarter "is well ahead of expectations, while the segment margin is also above."
"Upside is concentrated in the aerospace and defense businesses. Collins Aerospace Systems is up 10% organically, with both core (UTC) and acquired Rockwell Collins revenue better than our estimate."
UTC did not provide an update on a voluntary severance package presented to Collins Aerospace employees in December. Eligible employees had until Feb. 1 to volunteer. The company has not disclosed how many employees it wanted to take the severance package.
Collins said eligible employees “include full- and part-time employees who are based in the United States and the Oakville facility in Canada.
In May 2018, UTC said it projects adding 35,000 U.S. jobs as part of a five-year expansion initiative, along with spending more than $6 billion on capital investments and $9 billion on research and development.
The expansion would represent a 17.5 percent increase in UTC’s global workforce to 235,000, and a 52 percent jump in its U.S. workforce from 67,000 to 102,000.
Although most of the jobs would go to operations in Connecticut, Florida and Georgia, there are plans to expand its North Carolina workforce by about 1,500 to 4,000.
