UTX United Technologies Corporation

By Thomas Gryta 

United Technologies Corp., which is preparing to break itself apart, reported a 73% jump in fourth-quarter profit as the conglomerate benefited from lower tax rates and a newly acquired aerospace business.

The Farmington, Conn., company said it remains on track to split into three companies by mid-2020. The move combines its Pratt & Whitney jet engine unit, aviation services business and its recently closed $23 billion acquisition of Rockwell Collins. The Otis elevator and Carrier building-systems businesses will each become separate companies.

Shares of rose 4.8% to $116.44 Wednesday afternoon, providing a boost to the lagging stock. UTC shares are down 18% in the last year compared with a 7% drop in the S&P 500 in the same period.

Higher-than-expected earnings were driven in part by lower U.S. corporate tax rates, said Chief Executive Greg Hayes on a conference call Wednesday. "I think, importantly, the beat was also driven by a much better Rockwell Collins performance after the acquisition."

Mr. Hayes said he expects the company will be ready for separation by the end of the year, but the timing will ultimately be decided by the completion of necessary tax rulings. The separation of the companies would produce "some relatively significant tax costs" in some regions, he said, unless the company gets favorable decisions.

"We really need to get those tax rulings to minimize the onetime costs," he said.

While the separation process has started, Mr. Hayes said the company would be open to selling one of the future spinoffs if such a deal produced more value for shareholders. "We're still listening," he said. "And at the same time, we we're working very hard to get the separation done."

Mr. Hayes reiterated the goal of $500 million in savings from the Collins deal in the first four years but said UTC is pushing to increase the projection. He said UTC's acquisition of Goodrich Corp. in 2012 began with a savings projection of $350 million and eventually hit $600 million.

In the fourth quarter, UTC's net income rose to $686 million, compared with $397 million in the year-earlier period. Excluding charges, adjusted profit was $1.95 a share, beating the $1.53 a share expected by analysts.

Sales at Carrier and Otis rose 2%, while those at Pratt & Whitney jumped 24%. Sales at the new Collins Aerospace division climbed 29%. Total revenue increased to $18 billion from $15.68 billion a year ago.

UTC's split is coming as investors are pressuring traditional conglomerates to become more focused. Rivals Honeywell International Inc. and General Electric Co. are both shaving off units to streamline their businesses.

Several activist investors had pushed UTC to split, and Mr. Hayes has openly expressed his preference for smaller, more focused companies. Before the Rockwell deal, UTC's revenue was about evenly split between airplanes and buildings.

--Micah Maidenberg contributed to this article.

Write to Thomas Gryta at thomas.gryta@wsj.com

(END) Dow Jones Newswires

January 23, 2019 13:59 ET (18:59 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.