Not counting peers like Honeywell (NYSE:HON), General Electric (NYSE:GE), and others, United Technologies Corporation's (NYSE:UTX) earnings have a direct relevance to five companies -- some of which don't even exist yet. The five are UTC itself; its future merger partner Raytheon Company (NYSE:RTN); the future merged company Raytheon Technologies; and the two companies that UTC will spin off -- Carrier and Otis.

So, in light of the earnings report, United Technologies investors should ask whether one of the other investment options is also a good value. Here's the lowdown.

What United Technologies will be in the future

The company's plan is to first separate Carrier and Otis from UTC, and then merge the remaining aerospace businesses (Pratt & Whitney and Collins Aerospace) with Raytheon, to create Raytheon Technologies. For reference, Raytheon shareholders will receive 43% of Raytheon Technologies, with United Technologies investors (following the Carrier and Otis spinoff) receiving 57%.

An airplane cockpit

Image source: United Technologies.

It's important to note these points. Buying into Raytheon now gets you exposure to UTC's aerospace businesses, but not to Carrier and Otis. Buying into UTC now gets you exposure to all four of its current businesses -- the two aerospace businesses along with Otis and Carrier.

Why does this matter? The answer is simple: UTC's aerospace businesses continue to outperform the other segments. Provided Raytheon is meeting expectations, it makes more sense to buy Raytheon stock in order to get exposure to UTC's aerospace businesses.

United Technologies earnings confirm the thesis

Digging into the details of UTC's earnings reveals a familiar refrain from previous quarters' earnings -- aerospace is outperforming the rest of the company.

Full-year sales are now expected to be $76 billion to $76.5 billion, compared to previous guidance of $75.5 billion to $77 billion. Free cash flow (FCF) is expected to be $5.3 billion to $5.7 billion, compared to a previous outlook of $4.5 billion to $5 billion -- representing a $750 million increase at the midpoint, with $500 million coming from a $1 billion reduction in portfolio separation costs.

Digging into the operational reasons for the guidance hike, it's clear that, once again, it's down to Collins Aerospace offsetting weakness at Carrier. Honeywell had already reported another strong quarter of aerospace aftermarket sales growth, so it was no surprise to see Collins Aerospace increase commercial aftermarket sales by a whopping 17% -- this bodes well for General Electric's upcoming earnings report -- and management upgraded full-year commercial aftermarket sales growth guidance to "up low teens" from "up high single" digits previously.

Meanwhile, Pratt & Whitney continues to perform as expected, notwithstanding the need to work on fixing a problem on the GTF (geared turbofan) engine for the Airbus A220.

  Full-Year Adjusted Operating Profit Increase Guidance

Division

Current

July 2019

January 2019

Otis

$0 million to $25 million

 ($25 million) to $25 million

($25 million) to $25 million

Carrier

($125 million) to ($100 million)

$0 to $50 million

$100 million to $150 million

Pratt & Whitney

$225 million to $250 million

 $200 million to $250 million

 $200 million to $250 million

Collins Aerospace Systems

$1.85 billion to $1.875 billion

$1.7 billion to $1.75 billion

$1.55 billion to $1.6 billion

Data source: United Technologies earnings presentations.

Otis and Carrier

There was positive news for Otis: The business returned to overall growth in new equipment orders, and, crucially, continued to grow equipment orders in the all-important China market -- a key strategic aim which will drive lucrative service revenue in the future.

A bar chart of Otis sales and orders growth from Q1 2018 through Q3 2019

Data source: United Technologies presentations.

Carrier had another disappointing quarter. Management reduced full-year guidance (see the table above), largely on the back of weakness in transport refrigeration, foreign currency movements, and the residential heating, ventilation, and air-conditioning market. Carrier is a very interesting business because of its potential for improvement following the spinoff, rather than its performance right now -- something value investors will be attracted to.

What this all means to investors

The midpoint of management's FCF guidance of $5.5 billion, added to $1 billion in separation costs, suggests $6.5 billion in FCF, which would put the stock at a forward price-to-FCF multiple of 18.4. That looks like a good value, compared to Honeywell's forward price-to-FCF valuation of 20.6, and the Raytheon merger looks well-thought-out.

That said, if aerospace is UTC's strength, then it probably makes more sense to buy Raytheon and wait for the merger, rather than buy United Technologies before the separation of Carrier and Otis. Meanwhile, value investors should keep a close eye out for the Carrier spinoff next year.