Why Is United Technologies (UTX) Down 5.2% Since Last Earnings Report?

A month has gone by since the last earnings report for United Technologies (UTX). Shares have lost about 5.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is United Technologies due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

United Technologies' Q2 Earnings and Revenues Beat

United Technologies reported better-than-expected second-quarter 2019 results. Quarterly adjusted earnings came in at $2.20 per share, surpassing the Zacks Consensus Estimate of $2.04. The bottom line was also higher than the year-ago figure of $1.97.

Revenues came in at $19,634 million, up 17.5% year over year. The top line also outpaced the consensus estimate of $19,459 million. The rise was driven by 6% contribution from organic sales growth and 13% positive impact of acquisitions, partially offset by 1% negative impact of currency translation.

Segmental Breakup

Otis’ revenues for the reported quarter were $3,348 million, up 0.1% year over year. Aggregate sales for the Carrier segment totaled $4,962 million, down 1.5%. Pratt & Whitney’s second-quarter revenues were $5,150 million, up 8.7%. Collins Aerospace Systems’ top line surged 65.9% to $6,576 million.

Costs and Margins

Cost of products and services sold during the second quarter was $14,413 million, up 16% year over year.

Selling, general and administrative expenses jumped 19.7% to $2,106 million.

Adjusted operating margin was 15%, up 80 basis points.

Balance Sheet/Cash Flow

Exiting the second quarter, United Technologies had cash and cash equivalents of $6,819 million, up from $6,152 million on Dec 31, 2018. Long-term debt was $37,910 million, down from $41,192 million recorded at the end of 2018.

During the April-June quarter, the company generated $2,111 million cash from operating activities compared with $2,102 million reported a year ago. Its capital expenditures were up 25.5% to $467 million.

Outlook

United Technologies has revised 2019 earnings guidance to $7.90-$8.05 per share from $7.80-$8.00 projected earlier. For 2019, it continues to expect revenues between $75.5 billion and $77 billion. It currently expects 4-5% organic sales growth for 2019, up from the 3-5% range guided earlier.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, United Technologies has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, United Technologies has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

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