(Adds detail about business outlook)
By Alwyn Scott
Dec 14 United Technologies Corp sounded
a cautious note on Wednesday, posting a forecast for adjusted
earnings next year at the low end of analyst expectations and
predicting only modest sales growth.
The maker of Otis elevators, Carrier air conditioners, Pratt
& Whitney aircraft engines and other aerospace components faces
challenges well known to investors that predate its agreement
with President-elect Donald Trump to keep Carrier jobs in
Indiana that were slated to move to Mexico.
It faces weak sales in China and Europe and is spending to
ramp up production of its new Pratt Geared Turbofan aircraft
engine for the new Airbus A320neo aircraft. Lower
profit margins on aircraft components it supplies to
new-generation jetliners such as the Boeing 787 and
Airbus A350 also are taking a toll, the company said.
The Farmington, Connecticut-based company also expects
foreign exchange conversion will buffet earnings in 2017, Chief
Executive Greg Hayes said on call with analysts, noting that
U.S. interest rates are likely to continue rising next year. In
a widely expected move, the U.S. Federal Reserve raised rates on
The comments by Hayes came as the company posted a forecast
for 2017 adjusted earnings of $6.30 to $6.60 a share. That
compared with the consensus estimate of $6.59 a share, according
to Thomson Reuters I/B/E/S. The company expects to report
adjusted earnings of $6.55 to $6.60 for 2016.
The 2017 earnings outlook includes 14 cents per share for
contingencies. The increase over 2016 comes from share buybacks
and tax savings that offset weakness in operating businesses,
interest expense and other costs, the company said.
Hayes said he was highly confident about his forecast for 2
percent to 9 percent sales growth in the company's aerospace
businesses next year. Otis also should continue growing, helped
by market share gains in China, he said.
Climate, controls and security, however, remain uncertain.
"The one question mark I would have is CCS," Hayes said. "We
need to get (it) back on the top-line growth trajectory."
United Technologies expects sales of $57.5 billion to $59
billion next year, compared with an estimated $57 billion to $58
billion in 2016.
In the longer term, "we remain confident in our 2020 outlook
of mid to high single-digit organic sales growth," Hayes said in
(Reporting by Alwyn Scott; Editing by Jonathan Oatis)