US Majors Report Results In Line With Expectations
28 Apr 17. The Reporting Season kicked off in the USA with the majority of majors reporting results in line with expectations.
Boeing
General Dynamics
KBR
L-3
Lockheed Martin
Raytheon
United Technologies
Boeing
26 Apr 17. Boeing Reports First-Quarter Results and Raises EPS Guidance
* GAAP EPS of $2.34 and core EPS (non-GAAP) of $2.01 on solid execution
* Revenue of $21.0bn reflecting 210 commercial and defense aircraft deliveries and services
* Strong operating cash flow of $2.1bn; repurchased 14.9m shares for $2.5bn
* Backlog grew to $480bn, including $27bn of net orders during the quarter
* Cash and marketable securities of $9.2bn provide strong liquidity
* Revenue, margin, and operating cash guidance reaffirmed; EPS guidance increased by $0.10 on tax benefit
Boeing Co (BA.N) on Wednesday reported a 19 percent rise in first-quarter profit and lifted its full-year profit forecast, as lower taxes offset declining revenue and lower-than-expected margins in its commercial airplane unit.
Boeing’s earnings results beat analysts’ expectations. But its decision to increase its full-year profit forecast by 10 cents reflected a lower tax rate, which tempered investor enthusiasm.
The world’s biggest plane maker said its effective tax rate fell about 4 percentage points compared with a year ago due to higher stock-based compensation.
“We don’t see investors giving Boeing much credit for a tax driven EPS ‘beat & raise,’” wrote Robert Stallard, an analyst at Vertical Research Partners, in a research note.
The company’s shares were down 1.1 percent at $181.45 in afternoon trade.
Analysts already had expected Boeing’s revenue to fall after the company said earlier this month that it delivered fewer aircraft in the quarter.
But many expected profit margins at Boeing’s jetliner business to rise more than they did. The 8.5 percent operating margin Boeing reported was at least half a percentage point below expectations, JPMorgan analyst Seth Seifman wrote in a research note.
The margin miss was largely the result of $142m in unanticipated, pretax costs from Boeing’s KC-46 military aerial refuelling tanker programme. Boeing charged $120m to the commercial airplane business and the remainder to defence.
Boeing Chief Financial Officer Greg Smith said that cost would not recur in future quarters, but noted the programme remains challenging and subject to possible additional costs.
Boeing’s cost-cutting and factory productivity improvements boosted earnings to $1.45bn (1.13bn pounds), or $2.34 per share, compared with $1.22bn, or $1.83 per share, a year earlier.
Core earnings, which exclude some pension and other costs, rose to $2.01 per share from $1.74, beating analysts’ consensus estimate of $1.94, according to Thomson Reuters I/B/E/S.
Boeing increased its full-year forecast for core profit to a range of $9.20 to $9.40 per share. The company did not change its forecast of delivering 760-765 commercial aircraft in 2017 and also left its revenue target unchanged at $90.5bn to $92.5bn.
Boeing also reported strong cash flow in the typically weak first quarter, which analysts said should be positive for investors. Cash flow from operations rose to $2.1bn from $1.3bn, compared with analysts’ estimates of $1bn, according to Thomson Reuters I/B/E/S.
Revenue fell 7.3 percent to $20.98bn, missing the consensus estimate of $21.30bn, according to Thomson Reuters I/B/E/S.
The decline in revenue came as commercial aircraft deliveries fell to 169 from 176, and because last year’s revenue figure included delivery of three C-17 military transport aircraft, a plane Boeing has stopped making.
Deliveries of 737s also dipped as Boeing built 737 MAX 8 jets that it plans to begin delivering this quarter, now that the plane has regulatory certification.
While Boeing delivered two fewer 777s in the quarter, it delivered two more 787 Dreamliner planes. (Source: Reuters)
The Boeing Company [NYSE: BA] reported higher first-quarter earnings and operating cash flow compared to the previous year, driven by solid execution on production programs and services. First-quarter GAAP earnings per share increased to $2.34 and core earnings per share (non-GAAP) increased to $2.01. Revenue decreased to $21.0bn, reflecting the timing of commercial and defense aircraft deliveries.
For the full year, GAAP earnings per share guidance increased to between $10.35 and $10.55 from $10.25 and $10.45 and core earnings per share (non-GAAP)* guidance increased to between $9.20 and $9.40 from $9.10 and $9.30, primarily driven by a lower-than-expected tax rate.
“With a sharp focus on performance and productivity, our team delivered another quarter of solid financial results, including year-over-year earnings growth and strong operating cash flow,” said Boeing Chairman, President and Chief Executive Officer Dennis Muilenburg. “In turn, we continued to position Boeing for growth with investments in new products and services, innovation, and our people, while again demonstrating our commitment to return significant cash to our shareholders.”
“We also achieved major milestones, including the certification of the new 737 MAX 8 and first flight of the 787-10 Dreamliner, and we captured a $3.4bn contract award for 268 Apache helicopters.”
“We remain on track to achieve our full-year revenue, earnings and cash flow targets as our teams deliver on our large and diverse order backlog. As we do so, we’re focused on accelerating productivity, quality and safety improvements, strengthening execution on development programs, and capturing new business opportunities.”
Operating cash flow in the quarter of $2.1bn was driven by solid operating performance and timing of receipts and expenditures. During the quarter, the company repurchased 14.9 m shares for $2.5bn, leaving $11.5bn remaining under the current repurchase authorization which is expected to be completed over approximately the next two years. The company also paid $868 m in dividends in the quarter, reflecting a 30 percent increase in dividends per share compared to the same period of the prior year.
Cash and investments in marketable securities totaled $9.2bn, down from $10.0bn at the beginning of the quarter. Debt was $10.8bn, up from the beginning of the quarter, primarily due to the issuance of new debt.
Total company backlog at quarter-end was $480bn, up from $473bn at the beginning of the quarter, and included net orders for the quarter of $27bn.
Segment Results
Commercial Airplanes
Commercial Airplanes first-quarter revenue was $14.3bn on services growth, offset by lower planned 737 deliveries, as we prepare for 737 MAX entry into service in May. First-quarter operating margin increased to 8.5 percent, reflecting improved performance on production and services programs, cost growth on the initial production of KC-46 Tanker aircraft, and less favorable delivery mix.
During the quarter, Boeing successfully completed first flight of the 787-10 Dreamliner. The 737 program rolled out the first 737 MAX 9 and received FAA certification for the 737 MAX 8. Demand continues to be strong for the 737 MAX with more than 3,700 orders since launch. Commercial Airplanes booked 198 net orders during the quarter. Backlog remains robust with more than 5,700 airplanes valued at $417bn.
Defense, Space & Security
Defense, Space & Security first-quarter revenue was $6.5bn. First-quarter operating margin increased to 11.3 percent, reflecting improved performance at BMA.
Boeing Military Aircraft (BMA) first-quarter revenue was $2.6bn, reflecting lower planned deliveries, and operating margin increased to 12.2 percent on improved performance. During the quarter, BMA was awarded a contract for 268 AH-64E Apache helicopters from the U.S. Army, a contract for 17 P-8A Poseidon aircraft from the U.S. Navy, Royal Australian Air Force, and the U.K. Royal Air Force, and a contract from the U.S. Air Force for an additional 15 KC-46 Tanker aircraft.
Network & Space Systems (N&SS) first-quarter revenue was $1.6bn, reflecting lower volume on Commercial Crew. Operating margin was 6.3 percent driven by lower satellite services volume and investments in development efforts. During the quarter, N&SS announced an order for a 702 satellite with a dual payload from SKY Perfect JSAT and Kacific.
Global Services & Support (GS&S) first-quarter revenue was $2.3bn, reflecting timing of contracts. Operating margin increased to 13.6 percent largely reflecting improved performance. During the quarter, GS&S was awarded a contract from the Republic of Korea Air Force to continue long-term sustainment of F-15 aircraft over the next five years.
Backlog at Defense, Space & Security was $63bn, of which 34 percent represents orders from international customers.
Additional Financial Information
At quarter-end, Boeing Capital’s net portfolio balance was $4.0bn. Total pension expense for the first quarter was $334m, down from $629m in the same period of the prior year. Unallocated items, eliminations and other revenue decreased primarily due to the elimination of intercompany revenue for one aircraft delivered under operating lease. The effective tax rate for the first quarter decreased from the same period in the prior year due to higher-than-expected tax benefits related to share-based compensation in the first quarter of 2017.
Outlook
The company’s 2017 updated financial and delivery guidance reflects continued solid performance across the company and the impact of the lower-than-expected tax rate.
General Dynamics
26 Apr 17. General Dynamics Reports First-Quarter 2017 Results
* Diluted earnings per share from continuing operations up 19.2% to $2.48
* Operating earnings up 12% to $1.04bn
* Earnings from continuing operations up 16.7% to $763m
* Operating margin of 13.9%, a 150 basis-point improvement
General Dynamics (NYSE: GD) today reported first-quarter 2017 earnings from continuing operations of $763m, a 16.7 percent increase over first-quarter 2016, on revenue of $7.4bn. Diluted earnings per share from continuing operations were $2.48 compared to $2.08 in the year-ago quarter, a 19.2 percent increase.
“General Dynamics delivered very strong first-quarter operating performance, demonstrated by 13.9 percent operating margins and 10.3 percent return on sales,” said Phebe N. Novakovic, chairman and chief executive officer. “We are on track for a productive 2017 as we continue our focus on operational improvement and successful execution on our robust backlog.”
Margin
Company-wide operating margin for the first quarter of 2017 was 13.9 percent, a 150 basis-point increase when compared to 12.4 percent in first-quarter 2016.
Cash
Net cash provided by operating activities in the quarter totaled $533 m, up 11 percent from the year-ago quarter. Free cash flow from operations, defined as net cash provided by operating activities less capital expenditures, was $471m.
Capital Deployment
The company repurchased 1.9m of its outstanding shares in the first quarter. In addition, in March, the board of directors increased the company’s quarterly dividend by 10.5 percent to $0.84 per share, representing the company’s 20th consecutive annual dividend increase.
Backlog
General Dynamics’ total backlog at the end of first-quarter 2017 was $60.4bn. There was order activity across the Gulfstream product portfolio and strong demand for defense products. The estimated potential contract value, representing management’s estimate of value in unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised options, was $24.6bn. Total potential contract value, the sum of all backlog components, was $85bn at the end of the quarter.
KBR
28 Apr 17. KBR Announces First Quarter 2017 Financial Results
* Revenues of $1.1bn, up 11% over prior year
* Solid earnings; GAAP EPS of $0.26 (with $0.02 impact from legacy legal fees)
* Adjusted 2017 EPS expected above mid-point of $1.10 and $1.40 range
* Reached substantial completion on an EPC power project in the U.S.
* PEMEX settlement completed and cash collected in April; to be recorded in Q2 2017
KBR, Inc. (NYSE: KBR), a global provider of differentiated, professional services and technologies across the asset and program life cycle within the government services and hydrocarbons industries today announced first quarter 2017 financial results.
Consolidated revenue in the first quarter of 2017 was $1.1bn compared to $1.0bn in the first quarter of 2016. Net income attributable to KBR was $37m or $0.26 per diluted share ($0.28 per diluted share excluding U.S. Government legacy legal fees of $2.4m) in the first quarter of 2017 compared to net income of $42m or $0.30 per diluted share ($0.34 per diluted share excluding U.S. Government legacy legal fees of $5.8m) in the first quarter of 2016.
Revenue in the first quarter increased from the same period a year ago driven by the recent acquisitions in the Government Services segment and organic growth from contracts with the U.S. Military. These revenue increases were partially offset by lower activity on various projects in our Engineering and Construction and Non-strategic Business segments that are now completed or nearing completion, including the final EPC power project.
Net income attributable to KBR reflects strong performance across all segments despite lower equity earnings from an LNG project joint venture in Australia (Ichthys), which is timing related. Gross profit improved to $82m from $68m in the prior year quarter, at 7.4% of revenues. This improvement was driven by improved project execution in the E&C segment. Equity in earnings decreased to $9m from $29m in the prior year quarter, driven by a lower percentage of completion adjustment on the Ichthys project through our Ichthys JV.
“We achieved predictable, consistent and profitable performance in our Government Services and Technology and Consulting segments, plus good progress on a number of engineering and construction projects, including the achievement of reaching substantial completion of our final EPC power project.” said Stuart Bradie, President and Chief Executive Office of KBR, Inc.
In April 2017, we settled our decade long dispute over an almost half billion judgment pertaining to the EPC 1 construction project executed for PEMEX Exploración y Producción (PEP). Under the settlement, we have been paid $435m for costs and fees owed for our work on the construction project. This settlement ends our collection efforts and all litigation between the parties has been dismissed.
“We also achieved substantial completion of an engineering, procurement and construction (EPC) services 650-megawatt combined cycle power plant. The completion of this project marks KBR’s exit from the fixed price EPC power business in the United States and achieves another milestone in our corporate strategy to exit this non-strategic business. We continue to make progress in resolving legacy legal matters and commercial disputes, further de-risking the business,” Bradie continued.
Segment Business Results
Government Services (GS) Results
GS revenue was $515m and gross profit was $37m, an increase of $305m and$16m, respectively, over the prior year. These increases were primarily due to the acquisitions of Wyle and HTSI (converted into KTS) in the third quarter of 2016, as well as from continued expansion of task orders on existing U.S. Government contracts including LogCAP IV and other international operating base contracts in support of the U.S. military. Integration of Wyle and KTS into KBR is progressing to plan and both are performing in line with expectations. These acquisitions position us in the domestic technology-focused engineering services industry and we expect continued growth in opportunities within this segment of our business.
Equity in earnings of unconsolidated affiliates was $9m, down $2m, primarily due to lower than expected maintenance activities on a U.K. Ministry of Defense project which are expected to recover throughout the remainder of 2017. The majority of the equity in earnings for the Government Services segment comes from joint ventures serving two programs which support the United Kingdom government — the U.K. Military Flying Training System (UKMFTS) program and the Army 2020 rebasing program. These two programs are operated under annuity-type contracts which were awarded last year and are expected to continue to grow significantly in 2017 as they ramp up. These two contracts extend for 18 and 23 years respectively, with a combined award value of almost $1bn.
Technology & Consulting (T&C) Results
T&C revenue decreased by $21m to $76m in the first quarter of 2017 while gross profit was $14m from the prior year. Gross profit margin remained flat at approximately 18% in each quarter. The decreases in revenue and gross profit were driven by lower volume of activity due to timing in the upstream oil and gas consulting portion of the T&C business. Backlog across the T&C grew in the quarter. The consulting sector appears to be gaining momentum through recent awards of smaller upstream studies and projects which typically precede larger investment decisions by the major oil and gas companies.
Engineering & Construction (E&C) Results
In the first quarter of 2017, E&C’s revenue was $489, a decrease of $117m from the same period in the prior year, primarily due to reduced activity across the sector. These decreases were partially offset by projects ramping up from new awards in 2016, including a construction project in Canada.
E&C gross profit was up by $4m to $33m in the first quarter of 2017 attributable to solid project performance as well as lower overhead costs associated with previously announced cost reduction activities.
Equity in earnings of unconsolidated affiliates was zero for the first quarter of 2017, down $18 m from the prior year predominantly due to a reduction in percentage of completion estimated on the Ichthys project, where increased forecast reimbursable costs delayed profit recognition to future periods. The decrease was offset with improving contributions from our Brown & Root Industrial Services joint venture maintenance business.
Non-strategic Business (NSB) Results
NSB revenue was $26m, a decrease of $57m primarily due to lower activity on EPC power projects as we have been winding down the fixed-price EPC power projects in the U.S. The final fixed-price EPC power project in the U.S. reached substantial completion during the first quarter of 2017. Gross profit decreased by $3m to a gross loss of $2m in the first quarter of 2017.
Cash Flow and Liquidity
Cash and equivalents decreased $126m during the first quarter of 2017 as compared to a decrease of $59m in the prior year. As expected, the decrease in cash and equivalents in 2017 was driven by higher operating cash flows used to fund several EPC contracts nearing completion within our E&C and NSB business segments. Cash and equivalents at March 31, 2017 totaled $410m, including $224m of domestic U.S. cash. As of March 31, 2017, our revolving credit agreement had an outstanding balance of $650m, leaving $350m of borrowing capacity.
New Business Awards and Backlog
Notable new awards during the first quarter of 2017 included:
Government Services
* We were awarded a seat on the Worldwide Engineering & Construction (WE&C) contract by the U.S. Air Force’s Civil Engineering Center. Under this contract, KBRwyle will have the opportunity to compete on task orders to provide a range of design, construction and engineering services for the U.S. Air Force. This contract consists of a five-year base period with three one year option periods with a maximum ceiling value of $950m.
* We were awarded an engineering services contract by NASA to support more than 20 NASAexploration missions. This is a five-year, single award indefinite-delivery/indefinite quantity (IDIQ) contract, will provide ground systems and operations support to various NASAmissions managed by Space Science Mission Operations and Earth Science Mission Operations at NASA’s Goddard Space Flight Center in Greenbelt, Maryland.
Technology and Consulting
* We were awarded a revamp contract by Mangalore Chemicals and Fertilizers LTD for its ammonia plant in India. Under the terms of the contract, KBR will provide its ammonia technology to enhance the energy efficiency of the plant. We were awarded a technology licensing and basic engineering design contracts by LG Chem for its ethylene plant in South Kore . Under the terms of the contract, KBR will provide license and basic engineering design services to expand the plant ethylene capacity by 230KTA to a total of 1,270KTA through the addition of two (2) new SCORE TM SC-1 proprietary furnaces and product recovery system modifications. This project is part of a larger LG Chem Daesan facility expansion that will enable the company to produce additional high value-added ethylene derivative products.
Engineering and Construction
* We were awarded a contract for independent verification services by Sydney Desalination Plant Pty Limited for its desalination plant rebuild works and associated systems commissioning. KBR previously provided Independent Verification services for the original construction of the Sydney Desalination Plant and has continued to provide engineering services for a range of projects since that time.
* We were awarded a contract for maintenance, planning and industrial services byInternational Paper (IP), a global producer of renewable packaging and paper products. The contract will be performed over the next four years. Under the new contract, KBR will provide industrial maintenance services of around 700,000 labor hours at IP’s offices in Svetogorsk, Russia. This contract is a continuation of KBR’s long-standing service providing maintenance services for IP globally.”
KBR backlog decreased from $10.9bn as of December 31, 2016 to $10.6bn as of March 31, 2017, with project work-off exceeding new awards, primarily in our E&C and GS business segments.
Guidance
Our guidance of earnings per share is on an adjusted EPS basis, which excludes legacy legal costs. The company reiterates its full year 2017 fully diluted adjusted earnings per share guidance of between $1.10 and $1.40 per share. However, with the resolution of the PEMEX settlement, we project earnings per share to be above mid-point in the range. Our diluted adjusted earnings per share excludes legal costs associated with legacy U.S. Government contracts which are expected to be approximately $9m, or $0.07 per fully diluted share in 2017. The estimated legacy legal fees do not assume any cost reimbursement from the U.S. Government that could occur in the future. Our estimated effective tax rate for 2017 will range from 25% to 27%. Our expected EBITDA range for 2017, which is on the same basis as the EPS guidance, is $300-$350m. The estimate for operating cash flows will range from $100 – $200m for 2017.
L-3
27 Apr 17. L3 Announces First Quarter 2017 Results.
* Diluted earnings per share (EPS) from continuing operations of $2.07
* Net sales increased 13% to $2.7bn
* Net cash from operating activities from continuing operations of $85m
* Book-to-bill ratio of 0.98x on funded orders of $2.6bn
* Increased 2017 financial guidance
L3 Technologies, Inc. (NYSE:LLL) today reported diluted EPS from continuing operations of $2.07 for the quarter ended March 31, 2017 (2017 first quarter), as compared to diluted EPS from continuing operations for the quarter ended March 25, 2016 (2016 first quarter) of $2.08. Net sales of $2,669m for the 2017 first quarter increased by 13% compared to the 2016 first quarter.
“We are pleased with our first quarter results, which reflect a 13% increase in net sales, primarily organic, and gains in funded orders,” said Michael T. Strianese, L3’s Chairman and Chief Executive Officer. “All of our segments are performing well and the recently realigned Electronic and Sensor Systems segments have sharpened our market focus, positioning L3 to anticipate and respond more quickly to evolving customer needs. We are confident that our disciplined approach to growth will contribute to the value we deliver to our customers and shareholders as we continue through 2017.”
As previously announced on January 25, 2017, the company realigned its Electronic Systems segment effective March 1, 2017. The Electronic Systems segment was separated into two segments named: (1) Electronic Systems and (2) Sensor Systems. Accordingly, the company’s structure consists of the following four segments: Electronic Systems, Aerospace Systems, Communication Systems and Sensor Systems. The company has reported its segment results for all periods presented under the realigned business segments.
L3 Consolidated Results
First Quarter Results of Operations: For the 2017 first quarter, consolidated net sales of $2,669m increased $316m, or 13%, compared to the 2016 first quarter. Organic sales(1) increased by $270m, or 11%, to $2,618m for the 2017 first quarter. Organic sales exclude $51m of sales increases related to business acquisitions and $5 m of sales declines related to business divestitures. For the 2017 first quarter, organic sales to the U.S. Government increased $218m, or 13%, to $1,95m and organic sales to international and commercial customers increased $52m, or 8%, to $668m.
Due to the calendarization of the Company’s fiscal quarter end dates, the 2017 first quarter had 7% more business days compared to the 2016 first quarter. The extra days in the 2017 first quarter will reverse in the 2017 fourth quarter.
Operating income for the 2017 first quarter increased by $1m compared to the 2016 first quarter. Operating income as a percentage of sales (operating margin) decreased by 120 basis points to 9.5% for the 2017 first quarter, compared to 10.7% for the 2016 first quarter. The decrease in operating margin was driven primarily by lower favorable contract performance adjustments, primarily at Aerospace Systems and higher severance and restructuring costs, primarily at Communication Systems. See the reportable segment results below for additional discussion of sales and operating margin trends.
The effective tax rate for the 2017 first quarter decreased to 22.2%. Diluted EPS from continuing operations was $2.07 for the 2017 first quarter compared to $2.08 for the 2016 first quarter. Diluted weighted average common shares outstanding for the 2017 first quarter increased slightly compared to the 2016 first quarter due to changes in the dilutive impact of common share equivalents, primarily caused by a higher L3 stock price.
Orders: Funded orders for the 2017 first quarter increased 1% to $2,624m compared to $2,591m for the 2016 first quarter. The book-to-bill ratio was 0.98x for the 2017 first quarter. Funded backlog decreased 0.5% to $8,855m at March 31, 2017, compared to $8,896m at December 31, 2016.
Cash Flow: Net cash from operating activities was $85m for the 2017 first quarter, a decrease of $27m, compared to $112m for the 2016 first quarter. The decrease in net cash from operating activities was driven primarily by higher uses of cash for working capital compared to the 2016 first quarter. Capital expenditures, net of dispositions, were $41m for the first quarter, compared to $28m for the 2016 first quarter. The Company paid dividends of $61m during the 2017 first quarter compared to $58 m during the 2016 first quarter. The Company did not repurchase any of its common stock during the 2017 first quarter. Repurchases of the Company’s common stock during the 2016 first quarter totaled $198m.
Reportable Segment Results
The company has four reportable segments. The company evaluates the performance of its segments based on their sales, operating income and operating margin. Corporate expenses are allocated to the company’s operating segments using an allocation methodology prescribed by U.S. Governmentregulations for government contractors. Accordingly, segment results include all costs and expenses, except for goodwill impairment charges and certain other items that are excluded by management for purposes of evaluating the performance of the company’s business segments.
Electronic Systems
Electronic Systems net sales for the 2017 first quarter increased by $144m, or 24%, compared to the 2016 first quarter. Organic sales increased by $101m, or 17%, compared to the 2016 first quarter. Organic sales exclude $48 m of sales increases related to business acquisitions and $5 m of sales declines related to business divestitures. Organic sales increased by: (1) $68m for Precision Engagement and Training primarily due to increased deliveries of fuzing and ordnance products for U.S. Army and U.S. Air Force (USAF) weapon systems, guidance and control products for the U.S. Army Paladin weapon system and higher volume on simulation and training devices, (2) $22 m for Aviation Products primarily due to deliveries of aviation recorders and traffic and collision avoidance systems for commercial airline customers and higher volume of overhaul and repair services for cockpit displays and aviation recorders for the U.S. military and (3) $11m for Power & Propulsion primarily due to higher volume on the U.S. Navy (USN) guided destroyer modernization program and ship board integrated and monitoring systems for a foreign navy customer.
Electronic Systems operating income for the 2017 first quarter increased by $6m, or 7%, compared to the 2016 first quarter. Operating margin decreased by 200 basis points to 12.3%. Operating margin decreased by: (1) 150 basis points due to net gains and losses related to business divestitures in the first quarters of 2016 and 2017, (2) 130 basis points for lower favorable contract performance adjustments across several business areas and (3) 70 basis points due to lower margins related to acquisitions and higher severance expense of $3m. These decreases were partially offset by 150 basis points primarily due to higher sales volume.
Aerospace Systems
Aerospace Systems net sales for the 2017 first quarter increased by $40m, or 4%, compared to the 2016 first quarter. Sales increased $60m for Vertex Aerospace and $17m for ISR Systems. These increases were partially offset by lower sales of $37m for Aircraft Systems. Sales increased for Vertex Aerospace primarily due to higher volume for: (1) the U.S. Army C-12 contract, (2) the new USAF KC-10 contractor logistics support contract, (3) USN and USAF training aircraft and (4) aviation support for the U.S. Army rotary wing training aircraft at Fort Rucker. At ISR Systems, higher volume for special mission aircraft and large ISR aircraft systems for the U.S. Government was partially offset by lower volume for large ISR aircraft systems for foreign military customers as contracts near completion and small ISR aircraft fleet management services on a completed USAF contract. Sales decreased for Aircraft Systems primarily due to lower volume for international aircraft modifications and reduced deliveries for aircraft cabin assemblies as contracts near completion.
Aerospace Systems operating income for the 2017 first quarter decreased by $37m, or 35%, compared to the 2016 first quarter. Operating margin decreased by 390 basis points to 6.6%. Operating margin decreased by: (1) 230 basis points due to lower favorable contract performance adjustments, primarily at ISR Systems, (2) 90 basis points due to a higher than planned price adjustment in the 2016 first quarter in ISR Systems that did not recur and (3) 70 basis points due to sales mix changes.
Communication Systems
Communication Systems net sales for the 2017 first quarter increased by $66m, or 14%, compared to the 2016 first quarter. The increase was primarily driven by Broadband Communication Systems due to increased volume and deliveries of secure networked communication systems to the U.S. Department of Defense (DoD) and deliveries of tactical communication terminals to the U.S. military.
Communication Systems operating income for the 2017 first quarter decreased by $8m, or 16%, compared to the 2016 first quarter. Operating margin decreased by 280 basis points to 8.0%. Operating margin decreased by: (1) 170 basis points due to higher severance and restructuring expenses of $9 m, primarily in Space & Power Systems related to the previously announced consolidation of the Company’s traveling-wave tube businesses and (2) 110 basis points primarily due to sales mix changes at Broadband Communication Systems.
Sensor Systems net sales for the 2017 first quarter increased by $66m, or 23%, compared to the 2016 first quarter. Organic sales increased by $64m, or 23%, compared to the 2016 first quarter. Organic sales exclude $2m of sales increases related to business acquisitions. Organic sales increased by: (1) $2m for Integrated Sensor Systems primarily due to increased deliveries of airborne turret systems to foreign military customers and higher volume for space electronics and infrared detection products, (2) $20m for Warrior Systems primarily driven by $13m of lower return allowances and deliveries of specialized night vision equipment to the Australian Defence Force and (3) $15m primarily for Advanced Programs due to increased task order volume on U.S. Government contracts.
Sensor Systems operating income for the 2017 first quarter increased by $40m compared to the 2016 first quarter. Operating margin increased to 14.3%. Operating margin increased by: (1) 440 basis points due to lower return allowances, (2) 340 basis points primarily for improved contract performance at Ocean Systems and (3) 300 basis points due to higher sales volume primarily at Integrated Sensor Systems.
Financial Guidance
Based on information known as of today, the company has updated its consolidated and segment financial guidance for the year ending December 31, 2017, previously provided on January 26, 2017, as presented in the tables below. All financial guidance amounts are estimates subject to change in the future, including as a result of matters discussed under the “Forward-Looking Statements” cautionary language beginning on page 7. The company undertakes no duty to update its guidance.
Lockheed Martin
25 Apr 17. Lockheed Martin Reports First Quarter 2017 Results.
– Net sales of $11.1bn
– Net earnings from continuing operations of $763m, or $2.61 per share
– Generated cash from operations of $1.7bn
– Returned $1.bn to stockholders, inclusive of $500m in share repurchases
Lockheed Martin (NYSE: LMT) today reported first quarter 2017 net sales of $11.1bn, compared to $10.4bn in the first quarter of 2016. Net earnings from continuing operations in the first quarter of 2017 were $763m, or $2.61 per share, compared to $806 m, or $2.61 per share, in the first quarter of 2016. Cash from operations was $1.7bn in both the first quarter of 2017 and 2016.
First quarter 2017 net earnings from continuing operations includes a $120m charge, recorded at Rotary and Mission Systems (RMS), for a loss program to design, integrate, and install an integrated air missile defense C4I system for an international customer and a $64m charge, which represents the Corporation’s portion of a noncash asset impairment charge recorded by an international equity method investee. These charges had the effect of reducing net earnings by $114m, or $0.39 per share. Net earnings from continuing operations for the first quarter of 2016 included a special charge of $80m for workforce reductions at the Corporation’s Aeronautics business segment, which decreased net earnings $49m, or $0.16 per share.
“Our team delivered strong performance for our customers in the first quarter that resulted in sales growth in every business segment,” said Chairman, President, and CEO Marillyn Hewson. “While our net earnings were impacted by certain adjustments, we increased our outlook for full year cash from operations by $300 m to at least $6.0bn and we continue to position the company to deliver outstanding value to customers and shareholders.”
Cash Deployment Activities
The Corporation’s cash deployment activities in the first quarter of 2017 consisted of the following:
* repurchasing 1.9 m shares for $500m, compared to 2.4m shares for $501m in the first quarter of 2016;
* paying cash dividends of $544m, compared to $533m in the first quarter of 2016; and
* making capital expenditures of $170m, compared to $151m in the first quarter of 2016.
Segment Results
The Corporation operates in four business segments organized based on the nature of products and services offered: Aeronautics, Missiles and Fire Control (MFC), Rotary and Mission Systems (RMS) and Space Systems.
During the third quarter of 2016, the Corporation increased its ownership interest in the AWE Management Limited (AWE) venture from 33 percent to 51 percent and began consolidating AWE. Consequently, the Corporation’s operating results for the first quarter of 2017 include 100 percent of AWE’s sales and 51 percent of AWE’s operating profit. Prior to increasing its ownership interest, the Corporation accounted for its investment in AWE using the equity method of accounting. Under the equity method of accounting, the Corporation only recognized its share, or 33 percent, of AWE’s earnings or losses. Accordingly, the Corporation’s operating results for the first quarter of 2016 do not include any sales generated by AWE and only 33 percent of AWE’s net earnings. AWE has been aligned under the Corporation’s Space Systems business segment.
Operating profit of the business segments includes the Corporation’s share of earnings or losses from equity method investees as the operating activities of the equity method investees are closely aligned with the operations of the Corporation’s business segments. United Launch Alliance (ULA), which is part of the Space Systems business segment, is the Corporation’s primary equity method investee. Operating profit of the Corporation’s business segments excludes the FAS/CAS pension adjustment, which represents the difference between total pension expense recorded in accordance with U.S. generally accepted accounting principles (FAS) and pension costs recoverable on U.S. Government contracts as determined in accordance with U.S. Government Cost Accounting Standards (CAS); expense for stock-based compensation; the effects of items not considered part of management’s evaluation of segment operating performance, such as charges related to significant severance actions and certain asset impairments; gains or losses from divestitures; the effects of certain legal settlements; corporate costs not allocated to the Corporation’s business segments; and other miscellaneous corporate activities.
Changes in net sales and operating profit generally are expressed in terms of volume. Changes in volume refer to increases or decreases in sales or operating profit resulting from varying production activity levels, deliveries or service levels on individual contracts. Volume changes in segment operating profit are typically based on the current profit booking rate for a particular contract.
In addition, comparability of the Corporation’s segment sales, operating profit and operating margin may be impacted favorably or unfavorably by changes in profit booking rates on the Corporation’s contracts accounted for using the percentage-of-completion method of accounting. Increases in the profit booking rates, typically referred to as risk retirements, usually relate to revisions in the estimated total costs that reflect improved conditions on a particular contract. Conversely, conditions on a particular contract may deteriorate resulting in an increase in the estimated total costs to complete and a reduction in the profit booking rate. Increases or decreases in profit booking rates are recognized in the current period and reflect the inception-to-date effect of such changes. Segment operating profit and margin may also be impacted favorably or unfavorably by other items. Favorable items may include the positive resolution of contractual matters, cost recoveries on restructuring charges, insurance recoveries and gains on sales of assets. Unfavorable items may include the adverse resolution of contractual matters; restructuring charges, except for significant severance actions which are excluded from segment operating results; reserves for disputes; certain asset impairments; and losses on sales of assets.
Segment Results
Aeronautics
Aeronautics’ net sales in the first quarter of 2017 increased $307m, or 8 percent, compared to the same period in 2016. The increase was primarily attributable to higher net sales of approximately $355m for the F-35 program due to increased volume on aircraft production and sustainment activities; and about $60m for the F-16 program due to higher volume on aircraft modernization programs. These increases were partially offset by a decrease of approximately $100m for the C-5 program due to one less aircraft delivery and lower sustainment activities.
Aeronautics’ operating profit in the first quarter of 2017 increased $16m, or 4 percent, compared to the same period in 2016. Operating profit increased approximately $60m for the F-35 program due to increased volume on aircraft production and sustainment activities and higher risk retirements. This increase was partially offset by a decrease of about $25m for various programs due to lower profit booking rate adjustments and establishment of a reserve; and approximately $10m due to lower equity earnings from investees. Adjustments not related to volume, including net profit booking rate adjustments, were about $15m higher in the first quarter of 2017 compared to the same period in 2016.
Missiles and Fire Control
MFC’s net sales in the first quarter of 2017 increased $55m, or 4 percent, compared to the same period in 2016. The increase was attributable to higher net sales of approximately $60 m for air and missile defense programs due to increased deliveries on certain programs (primarily Patriot Advanced Capability (PAC-3)); and about $60m for fire control programs (primarily LANTIRN® and SNIPER®) due to increased deliveries. These increases were partially offset by a decrease of $50m for tactical missiles programs (primarily Precision Fires) due to fewer deliveries.
MFC’s operating profit in the first quarter of 2017 was comparable to profit in the same period of 2016. Operating profit decreased approximately $25m for tactical missiles programs due to lower risk retirements and fewer deliveries (primarily Precision Fires). This decrease was partially offset by an increase of about $25m for higher risk retirements and increased deliveries on fire control programs (LANTIRN® and SNIPER®) and air and missile defense programs (PAC-3). Adjustments not related to volume, including net profit booking rate adjustments, in the first quarter of 2017 were comparable to the same period in 2016.
Rotary and Mission Systems
RMS’ net sales in the first quarter of 2017 increased $97m, or 3 percent, compared to the same period in 2016. The increase was primarily attributable to higher net sales of about $280m due to certain adjustments recorded in 2016 required to account for the November 6, 2015 acquisition of Sikorsky. This increase was partially offset by a net decrease of approximately $100m primarily driven by fewer deliveries of helicopters; and a decrease of about $65m at C4ISR and Undersea Systems and Sensors (C4USS) programs and training and logistics services programs due to volume.
RMS’ operating profit in the first quarter of 2017 decreased $121m, or 53 percent, compared to the same period in 2016. Operating profit decreased about $110m for C4USS programs due to a $120m charge for performance matters on the international contract, EADGE-T; and about $25m for training and logistics services programs due to lower risk retirements. These decreases were partially offset by an increase of about $35m for Sikorsky due to certain adjustments recorded in the first quarter of 2017 and 2016 required to account for the November 6, 2015 acquisition of Sikorsky and amortization of intangible assets, partially offset by a decrease of about $20m primarily driven by fewer deliveries of helicopters and lower equity earnings from investees. Adjustments not related to volume, including net profit booking rate adjustments, were about $115m lower in the first quarter of 2017 compared to the same period in 2016.
Space Systems
Space Systems’ net sales in the first quarter of 2017 increased $230m, or 11 percent, compared to the same period in 2016. The increase was attributable to approximately $325m due to net sales from AWE, which the Corporation began consolidating in the third quarter of 2016. This increase was partially offset by a decrease of $35m for the Orion program due to lower volume; and a decrease of $25m for government satellite programs (primarily Advanced Extremely High Frequency (AEHF) and Mobile User Objective System (MUOS)) due to decreased volume.
Space Systems’ operating profit in the first quarter of 2017 increased $44m, or 18 percent, compared to the same period in 2016. Operating profit increased about $40m due to increased equity earnings from an investee (ULA). Adjustments not related to volume, including net profit booking rate adjustments, were about $25m higher in the first quarter of 2017 compared to the same period in 2016.
Total equity earnings recognized by Space Systems (primarily ULA) represented about $80m, or 28 percent, of this business segment’s operating profit in the first quarter of 2017, compared to approximately $50m, or 20 percent, in the first quarter of 2016.
Unallocated items
On Aug. 16, 2016, the Corporation completed the divestiture of its former IS&GS business. Accordingly, the operating results of IS&GS have been classified as discontinued operations in the first quarter of 2016. General corporate overhead costs that were historically allocated to and included in the operating results of IS&GS in the first quarter of 2016 have been reclassified into “Unallocated items” and included in the results of the Corporation’s continuing operations because they were not directly attributable to IS&GS and the Corporation continues to incur these costs subsequent to the divestiture.
The amount of general corporate overhead costs previously included in the operating results of IS&GS that have been reclassified to and included in the results of the Corporation’s continuing operations were $35m in the first quarter of 2016. These costs are included in the “Other, net” line.
Additionally, the Corporation retained all assets and obligations related to the pension benefits earned by former IS&GS salaried employees through the date of divestiture. Therefore, the non-service portion of net pension costs (interest cost, actuarial gains and losses and expected return on plan assets) for these plans in the first quarter of 2016 have been reclassified to and included in the results of the Corporation’s continuing operations because the Corporation continues to incur these costs. The non-service portion of net pension costs previously included in the operating results of IS&GS that have been reclassified to and included in the results of the Corporation’s continuing operations were $22m in the first quarter of 2016. These costs are included in the “FAS/CAS pension adjustment” line.
In the first quarter of 2017, the Corporation recognized a $64 m charge, which represents the Corporation’s portion of a noncash asset impairment charge recorded by an international equity method investee, which had the effect of reducing net earnings by $40m, or $0.14 per share. This charge is included in the “Other, net” line.
Income Taxes
The Corporation’s effective income tax rate from continuing operations was 23.3 percent in the first quarter of 2017, compared to 18.9 percent in the first quarter of 2016. The rates for both periods benefited from tax deductions for U.S. manufacturing activities, dividends paid to the Corporation’s defined contribution plans with an employee stock ownership plan feature, tax benefits for employee equity awards, and the research and development tax credit. For the first quarter of 2017 and 2016 the tax benefits of employee equity awards reduced our effective tax rate by 6.2 and 10.4 percentage points, respectively.
Northrop Grumman
26 Apr 17. Northrop Grumman Reports First Quarter 2017 Financial Results
- Q1 Sales Increase 5 percent to $6.3bn
- Q1 EPS Increase 20 percent to $3.63
- 2017 EPS Guidance Increased to $11.80 to $12.10
Northrop Grumman Corporation (NYSE: NOC) reported first quarter 2017 sales increased 5 percent to $6.3bn from $6.0bn in the first quarter of 2016. First quarter 2017 net earnings increased 15 percent to $640m from $556m in the prior year period. First quarter 2017 diluted earnings per share increased 20 percent to $3.63 from $3.03 in the first quarter of 2016. First quarter 2017 diluted earnings per share are based on 176.1m weighted average diluted shares outstanding compared with 183.4m in the prior year period, a 4 percent decrease.
“First quarter results are a strong start to the year, with solid operational performance from all three of our businesses. We continue to position our company for long-term profitable growth,” said Wes Bush, chairman, chief executive officer and president.
First quarter 2017 segment operating income increased 4 percent to $726m, primarily due to higher Aerospace Systems sales volume, while segment operating margin rate decreased 20 basis points to 11.6 percent largely due to contract mix. The company’s effective tax rate of 17.2 percent was comparable to the prior year period. First quarter 2017 federal and foreign income tax expense and effective tax rate reflect a $47m benefit recognized for excess tax benefits related to employee share-based compensation, a $42m benefit recognized in connection with resolution of the Internal Revenue Service examination of the company’s 2012-2013 tax returns, and a $22m benefit recognized for additional research credits claimed on prior year tax returns. In the prior year first quarter, the company’s federal and foreign income tax expense included an $80m benefit recognized for excess tax benefits related to employee share-based compensation.
First quarter 2017 cash used in operating activities totaled $439m compared to $60m used in the first quarter of 2016. First quarter 2017 free cash flow was a use of $655m after capital expenditures of $216m. Changes in cash and cash equivalents include the following for cash from operating, investing and financing activities through March 31, 2017: Operating • $439m used in operations Investing • $216 m for capital expenditures Financing • $229m for repurchase of common stock • $166m for dividends
First quarter 2017 sales increased 5 percent, largely driven by a 13 percent sales increase at Aerospace Systems. First quarter 2017 segment operating income increased 4 percent and includes higher operating income at Aerospace Systems and Technology Services. First quarter 2017 segment operating margin rate declined to 11.6 percent primarily due to changes in contract mix at Aerospace Systems and the timing of risk reductions at Mission Systems.
Aerospace Systems
Aerospace Systems first quarter 2017 sales increased 13 percent primarily due to higher volume for Manned Aircraft programs, including restricted work and increased F-35 deliveries. Autonomous Systems sales increased slightly and reflect higher Triton volume and lower NATO Alliance Ground Surveillance volume. Space sales were comparable to the prior year period. Aerospace Systems first quarter 2017 operating income increased 9 percent due to higher sales. Operating margin rate decreased to 10.8 percent principally due to changes in contract mix on Manned Aircraft programs and the timing of risk reductions on Space programs, partially offset by improved performance on Autonomous Systems programs.
Mission Systems
Mission Systems first quarter 2017 sales increased 2 percent primarily due to higher Sensors and Processing volume, partially offset by lower Advanced Capabilities volume. Sensors and Processing sales reflect higher volume on communications and combat avionics programs. Advanced Capabilities sales reflect lower volume on navigation and maritime systems programs. Cyber and ISR sales were comparable to the prior year period. Mission Systems first quarter 2017 operating income was unchanged. Operating margin rate decreased to 12.9 percent, primarily due to the timing of risk reductions on Advanced Capabilities programs, partially offset by improved performance on Cyber and ISR programs.
Technology Services
Technology Services first quarter 2017 sales decreased 2 percent due to lower sales for System Modernization and Services programs and Advanced Defense Services programs. System Modernization and Services and Advanced Defense Services sales decreased principally due to the completion of several programs in 2016. Global Logistics and Modernization sales were comparable to the prior year period and included higher international revenue, partially offset by lower volume on the KC-10 program. Technology Services first quarter 2017 operating income increased by $ m, and operating margin rate increased to 11.0 percent principally due to improved performance on System Modernization and Services and Global Logistics and Modernization programs.
Guidance
The company’s 2017 financial guidance assumes no disruption to or cancellation of any of our significant programs and no disruption to or shutdown of government operations. Guidance for 2017 also assumes adequate and timely appropriations and funding for the company’s programs for the remainder of the year.
Raytheon
27 Apr 17. Raytheon Reports Solid First Quarter 2017 Results.
– Bookings of $5.7bn; backlog of $36.1bn, up 5.5 percent
– Net sales of $6.0bn, up 3.4 percent
– EPS from continuing operations of $1.73, up 21.0 percent
– As previously announced, increased annual dividend by 8.9 percent to $3.19 per share
– Updated full-year 2017 guidance
Raytheon Company (NYSE: RTN) today announced net sales for the first quarter 2017 of $6.0bn, up 3.4 percent compared to $5.8bn in the first quarter 2016. First quarter 2017 EPS from continuing operations was $1.73, up 21.0 percent compared to $1.43 in the first quarter 2016. The increase in the first quarter 2017 EPS from continuing operations was primarily driven by operational improvements.
“Solid revenue growth and margin expansion drove strong earnings per share performance in the first quarter, with all of our businesses meeting or exceeding expectations,” said Thomas A. Kennedy, Raytheon Chairman and CEO. “Our focus on global growth and operational excellence, combined with our balanced capital deployment strategy, continues to create value for our customers and shareholders.”
Operating cash flow from continuing operations for the first quarter 2017 was an outflow of $41 m compared to an inflow of $325m for the first quarter 2016. The change in operating cash flow from continuing operations in the first quarter 2017 was primarily due to the timing of collections.
As previously reported, effective January 1, 2017, the company adopted the new revenue recognition standard utilizing the full retrospective transition method. The impact of adopting the new standard on the company’s 2016 net sales and operating income was not material. All 2016 financial results have been recast to reflect this change.
Bookings in the first quarter 2017 were $5.7bn compared to $6.2bn in the first quarter 2016.
Backlog at the end of the first quarter 2017 was $36.1bn, an increase of approximately $1.9bn or 5.5 percent compared to the first quarter 2016.
In the first quarter 2017, the company repurchased 2.7m shares of common stock for $400m. In addition, as previously announced, Raytheon’s Board of Directors voted to increase the annual dividend rate by 8.9 percent from $2.93 to $3.19 per share, the thirteenth consecutive annual dividend increase.
Segment Results
The company’s reportable segments are: Integrated Defense Systems (IDS); Intelligence, Information and Services (IIS); Missile Systems (MS); Space and Airborne Systems (SAS); and ForcepointTM.
Integrated Defense Systems
Integrated Defense Systems (IDS) had first quarter 2017 net sales of $1,398m, up 5 percent compared to $1,336m in the first quarter 2016. The increase in net sales for the quarter was primarily driven by higher net sales on an international early warning radar program awarded in the first quarter 2017.
IDS recorded $212m of operating income in the first quarter 2017 compared to $146m in the first quarter 2016. The increase in operating income for the quarter was primarily driven by higher net program efficiencies and a favorable change in program mix. The first quarter 2016 included a $36m unfavorable program adjustment.
During the quarter, IDS booked $987m for the Upgraded Early Warning Radar (UEWR) system for Qatar. IDS also booked $220m to provide Patriot™ engineering services support for U.S. and international customers.
Intelligence, Information and Services (IIS) had first quarter 2017 net sales of $1,507m compared to $1,532m in the first quarter 2016. As expected, the change in net sales for the quarter was primarily driven by lower net sales on an international classified program.
IIS recorded $111m of operating income in the first quarter 2017 compared to $10 m in the first quarter 2016. The increase in operating income for the quarter was primarily driven by a favorable change in program mix.
During the quarter, IIS booked approximately $930m on U.S. Air Force programs. IIS also booked $390m on a number of classified contracts.
Missile Systems
Missile Systems (MS) had first quarter 2017 net sales of $1,756m compared to $1,723m in the first quarter 2016.
MS recorded $216m of operating income in the first quarter 2017 compared to $192m in the first quarter 2016. The increase in operating income for the quarter was primarily due to a favorable change in program mix.
During the quarter, MS booked $203 m for AIM-9X Sidewinder™ short-range air-to-air missiles for the U.S. and international customers and $159 m for Paveway™ for international customers.
Space and Airborne Systems
Space and Airborne Systems (SAS) had first quarter 2017 net sales of $1,555m, up 8 percent compared to $1,445m in the first quarter 2016. The increase in net sales for the quarter was primarily driven by higher net sales on an electronic warfare systems program.
SAS recorded $190m of operating income in the first quarter 2017 compared to $167m in the first quarter 2016. The increase in operating income for the quarter was primarily driven by a favorable change in program mix and higher volume.
During the quarter, SAS booked $256m for Active Electronically Scanned Array (AESA) radars for the U.S. Air Force, and $250m on two contracts for international customers, one for military processors and one for radar warning receivers. SAS also booked $402m on a number of classified contracts.
Forcepoint
Forcepoint had first quarter 2017 net sales of $144m, up 4 percent compared to $139m in the first quarter 2016. Forcepoint recorded $16m of operating income in the first quarter 2017 compared to $18m in the first quarter 2016.
United Technologies
26 Apr 17. UTC Reports First Quarter 2017 Results.
* Sales of $13.8bn were up 3 percent versus prior year including 3 percent organic sales growth
* GAAP EPS of $1.73, up 23 percent versus prior year
* Adjusted EPS of $1.48, up 1 percent versus prior year
United Technologies Corp. (NYSE: UTX) today reported first quarter 2017 results. All results in this release reflect continuing operations unless otherwise noted.
“United Technologies is off to a great start in 2017 as all four businesses delivered strong top line growth,” said UTC Chairman and Chief Executive Officer Gregory Hayes. “Our continued execution against our strategic priorities and our investments in innovation are enabling us to meet our financial commitments. We remain fully confident in our 2017 expectations and our 2020 targets. Our portfolio of industry leading franchises is well positioned to create significant and sustainable long-term shareholder value.”
First quarter GAAP EPS of $1.73 was up 32 cents (23 percent) versus the prior year and included 25 cents of favorable non-recurring significant items net of restructuring. Adjusted EPS of $1.48 was up 1 percent. Sales of $13.8bn were up 3 percent, driven by 3 points of organic growth and 1 point of net acquisition growth, partially offset by 1 point of adverse foreign exchange.
Net income for the quarter was $1.4bn, up 18 percent versus the prior year. Cash flow from operations for the quarter was $1.0bn (72 percent of net income attributable to common shareholders) and capital expenditures were $325m. Free cash flow of $668m in the quarter was 48 percent of net income attributable to common shareowners.
In the quarter, Otis new equipment orders increased 4 percent versus the prior year at constant currency and grew 11 percent excluding China. Equipment orders at UTC Climate, Controls & Security increased by 7 percent. Commercial aftermarket sales were up 7 percent at Pratt & Whitney and were up 12 percent at UTC Aerospace Systems.
UTC reiterated its 2017 outlook and continues to anticipate:
* Adjusted EPS of $6.30 to $6.60*;
* Total sales of $57.5 to $59bn, with year over year growth of 1 to 3 percent including organic sales growth of 2 to 4 percent*;
* Free cash flow in the range of 90 to 100 percent* of net income attributable to common shareowners;
* Share repurchases of $3.5bn; and
* A $1bn to $2bn placeholder for acquisitions.
United Technologies quarterly results beat Wall St estimates. United Technologies ticked higher in pre-market trading after the company that makes everything from jet engines to elevators posted better than expected quarterly profits and sales. The Connecticut-based company said profits climbed 18 per cent year-on-year to $1.4bn. Adjusting for one-time items, earnings of $1.48 a share exceeded Wall Street expectations of $1.36. Sales rose 3 per cent to $13.8bn, also beating estimates of $13.5bn. Revenues at the company’s Otis unit that had struggled amid a slowdown in Chinese construction that had weakened demand for elevators edged up to $2.8bn from $2.72bn in the same three-month period in 2016. United Technologies was one of the companies targeted by Donald Trump for moving jobs overseas and the first to backpedal, scrapping plans for a Carrier plant in Mexico. Indeed, Carrier, which makes residential furnaces, said several hundred jobs would not be moved to Mexico from Indiana as part of a deal that would see the company receive up to $7m in Indiana state tax credits and retraining aid over 10 years. The company reaffirmed its 2017 outlook for earnings in the range of $6.30 to $6.60 and organic sales growth in the range of 2 to 4 per cent. United shares have advanced nearly 7 per cent so far this year. They were up 0.8 per cent in pre-market trading. (Source: FT.com)