United Tech results beat as booming air travel spurs demand

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United Technologies Corp (UTX.N) reported quarterly results that topped analysts’ estimates on Tuesday and raised its full-year forecasts, citing higher demand for spare parts and services from airlines dealing with booming passenger travel.

Shares of the maker of Otis Elevators, Pratt & Whitney aircraft engines and Carrier air conditioners rose as much as 3 percent to $125.50.

Chief Financial Officer Akhil Johri told Reuters that United Tech expects to meet its full-year target for engine deliveries to Airbus SE (AIR.PA) and is optimistic that its suppliers can keep pace with rising engine production.

The Pratt & Whitney unit, which has faced a series of setbacks with its geared turbofan engine, halted deliveries for the Airbus A320neo for almost a month earlier this year after discovering a new problem.

The issues are coming under control and “we feel very good about the supply chain and our ability to support Airbus requirements,” Johri said.

The company raised its 2018 adjusted earnings per share forecast to a range of $6.95-$7.15 from $6.85-$7.10, and full-year sales to a range of $63 billion to $64.5 billion from $62.5 billion to $64 billion.

United Tech said the decision to increase its earnings and sales forecasts this early in the year is unusual and reflected its confidence in its performance.

“We never raise the outlook in the first quarter,” Johri said.

The company said sales in its Pratt & Whitney unit, which also makes the engine for Lockheed Martin Corp’s (LMT.N) F-35 combat jets, rose 15.2 percent.

Its aerospace systems division, which makes engine components and provides spare parts, overhaul and repair services, reported a 5.7 percent rise in sales.

“United Tech’s first quarter aero aftermarket results were strong once again and read across well to other aero suppliers (Safran, Rolls-Royce and TransDigm) as we begin 1Q18 earnings season,” Vertical Research Partners analyst Robert Stallard said.

Sales in the company’s unit that makes Carrier air conditioners and video surveillance systems were up 7 percent.

United Tech has seen about a 1 percent increase in costs so far because of recent U.S. tariffs on steel and aluminum imports.

“We are hoping it just results in negotiations (between United States and China) and (more) tariffs don’t come into play,” Johri said.

On an adjusted basis, the company earned $1.77 per share, beating analysts’ expectation of $1.52 per share.

Net sales rose to $15.24 billion, above the $14.64 billion expected by the market, according to Thomson Reuters I/B/E/S.

Source:-reuters