United Technologies Earnings: What to Expect This Week

United Technologies (UTX 0.12%) will release its quarterly report on Wednesday, and the stock has soared to all-time record highs on the strength of its aviation and defense-centered business. Yet even if United Technologies earnings continue to grow, the question the conglomerate faces is whether it can outperform peers Boeing (BA +2.28%) and Lockheed Martin (LMT 0.23%) in making the most of opportunities in the military and commercial side of its core business.

United Technologies has a wide array of businesses, making everything from Otis elevators to commercial heating, ventilating, air conditioning, and refrigeration systems. But especially after its acquisition of Goodrich, United Technologies has relied increasingly on its aerospace prowess, with its Pratt & Whitney division helping to supply engines and its Sikorsky segment manufacturing helicopters and related parts. With the boom in aerospace, can United Technologies keep up the pace against Boeing, Lockheed Martin, and other companies serving both the civilian and military areas? Let's take an early look at what's been happening with United Technologies over the past quarter and what we're likely to see in its report.

Photo credit: Bin Im Garten.

Stats on United Technologies

Source: Yahoo! Finance.

What's next for United Technologies earnings?
In recent months, analysts have gotten less excited about their views on United Technologies earnings, cutting their fourth-quarter estimates by a penny per share and their full-year 2014 projections by just over 1%. The stock, though, has performed well, climbing more than 8% since mid-October.

United Tech's third-quarter earnings report was just the latest sign of the success that the company has had lately. Earnings rose 13% from the year-ago quarter, and United Tech raised the lower end of its earnings guidance range by a dime per share despite seeing weak revenue from poor economic conditions in Europe and falling demand from military customers. Given the ongoing pullback in military spending, the results validated CEO Louis Chenevert's overall strategy toward taking more advantage of commercial aerospace opportunities rather than relying on defense-oriented business. That should give United Tech a key advantage over Lockheed Martin, from which investors expect falling revenue because of its greater emphasis on its defense business.

Aerospace continues to be the highest growth driver for United Tech, but it's important not to underestimate the value of the Otis and Carrier brands in giving the company needed diversification. Otis hasn't grown at anything close to the rate of other divisions, but its operating margins are the highest of any segment in the company. Meanwhile, the climate, controls, and security segment saw a 10% jump in profits during the third quarter on general strength in business spending on increasingly important tools to make operations more efficient. Those businesses will be essential if United Tech wants to outperform aerospace giant Boeing.

In many ways, though, United Tech needs Boeing to succeed to guarantee its own positive performance. For instance, United Technologies makes key systems for Boeing's 787 Dreamliner aircraft, which has been plagued with problems throughout the past year. Although General Electric (GE 0.72%) makes the majority of engines for the aircraft, United Tech supplies most of the parts that Rolls-Royce uses for its share of Dreamliner engine production, and so it needs Boeing to resolve any lingering problems with the model in order to make sure that it reaps its share of profits from aircraft sales going forward. Similarly, United Tech is a subcontractor on a massive Boeing defense tanker contract, showing the interrelation among various players in the defense industry.

In the United Technologies earnings report, watch closely to see the breakdown of growth among the company's various business segments. Ideally, investors will want to see solid growth in all of United Tech's businesses, to guarantee that any future weakness in any one area won't lead to major disruptions to the company as a whole.

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