United Tech's Profit Surges Ahead of Its Planned Split -- WSJ
January 24 2019 - 3:02AM
Dow Jones News
By Thomas Gryta
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (January 24, 2019).
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 UTC 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 24, 2019 02:47 ET (07:47 GMT)
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