What To Expect From United Technologies' (UTX) Q4 Earnings?

Diversified conglomerate, United Technologies Corporation (NYSE:UTX) is scheduled to report fourth-quarter 2017 results before the opening bell on Jan 24. The company is likely to report higher revenues in the impending quarter owing to a favorable macroeconomic environment.

Whether this can translate to bottom line growth of the company remains to be seen.

Top-Line Growth

Revenues of the company are largely affected by spending in the U.S. military and commercial aviation industries. An increase in demand for the company’s products in these industries is likely to favorably impact its financial performance in the quarter.

The Zacks Consensus Estimate for revenues of fourth quarter of 2017 for United Technologies is $15,400 million, significantly higher than reported revenues of $14,659 million in the prior-year quarter. Revenues across Otis, Pratt & Whitney and Aerospace Systems segments are expected to increase year over year to $3,112 million, $4,157 million and $3,858 million, respectively from $3,063 million, $3,992 million and $3,598 million.

In September 2017, United Technologies announced its plans to acquire Rockwell Collins (NYSE:COL), an Iowa-based avionics firm. Post the acquisition, United Technologies is expected to emerge as one of the world’s largest aircraft equipment manufacturers. The acquisition, slated to be completed by the third quarter of 2018, will provide a huge competitive advantage to the company and increase its bargaining power. The resultant operating synergies and lower operating costs will help it create complementary products that will help it serve evolving global customer needs.

The merger is expected to be a huge boost to the company’s revenues and adjusted earnings per share after the first full year of combined operations with synergies to the tune of more than $500 million. Although the transaction will not have any direct impact on the earnings in the quarter, it is likely to attract similar lucrative deals for the company that in turn could augment overall revenues in the quarter.

Other Key Factors

The strong aftermarket business that sells spare parts and offers related services to keep the primary products running is also likely to record a healthy growth momentum with uptick in the economy. Furthermore, continued focus on four key priorities to fuel its growth momentum, namely flawless execution, innovation for growth, structural cost reduction and disciplined capital allocation is likely to translate to improved performance in the quarter.

Our proven model does not conclusively show that United Technologies is likely to beat earnings this quarter as it does not possess the key components. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here as you will see below:

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

United Technologies Corporation Price and EPS Surprise

United Technologies Corporation Price and EPS Surprise | United Technologies Corporation Quote

Zacks Rank: United Technologies has a Zacks Rank #3. While this increases the predictive power of ESP, we need to have a positive ESP to be confident about an earnings surprise.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.

Stocks to Consider

Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Apple Inc. (NASDAQ:AAPL) has an Earnings ESP of +1.12% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

AmerisourceBergen Corporation (NYSE:ABC) has an Earnings ESP of +1.50% and a Zacks Rank #2.

American Financial Group, Inc. (NYSE:AFG) has an Earnings ESP of +1.21% and a Zacks Rank #2.

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