By Lewis Krauskopf
(Reuters) - United Technologies Corp (N:UTX) reported a drop in quarterly profit on Tuesday that still beat analyst expectations, and its chief executive said the industrial manufacturer would announce a significant restructuring before the end of the year.
The U.S. aerospace and building systems conglomerate, which also revealed plans to buy back $12 billion of shares, will announce "significant additional restructuring actions" in the fourth quarter, Chief Executive Greg Hayes told analysts on the company's third-quarter conference call.
"We have seen some opportunities to do some longer-term structural cost reduction," Hayes said.
United Tech backed its profit forecast for 2015 after cutting it three times earlier in the year.
Including $4 billion in repurchases made so far this year, United Tech said it would expect to complete $16 billion of share repurchases through 2017.
"There is such a disconnect between the trading price and the intrinsic value that we find that doing share buyback is the best M&A that we can do in the short run," Hayes said in an interview.
Shares jumped 2.4 percent to $94.29 in morning trading. The stock had slumped about 20 percent this year through Monday due to the weaker earnings outlook.
For the third quarter, United Tech said net income fell to $1.36 billion from $1.85 billion a year ago.
Earnings from continuing operations declined to $1.61 per share from $1.93 a share a year ago. Analysts, on average, were expecting $1.55 a share, according to Thomson Reuters I/B/E/S.
Revenue fell 5.7 percent to $13.79 billion, about $770 million below analysts' expectations.
Sales fell 1 percent, excluding the negative impact from currency swings. The company cited a delay in jet engine deliveries for its Pratt & Whitney division that it expects to recover in the fourth quarter.
"Considering the revenue headwinds that UTX faced in the quarter, we view this as a good operating performance," RBC Capital Markets analyst Robert Stallard said in a research note.
The company said its board authorized a $12 billion share repurchase program, including a $6 billion accelerated share repurchase using proceeds from selling its Sikorsky helicopter unit to Lockheed Martin (N:LMT). United Tech expects the Sikorsky sale to close in the fourth quarter.
Even with the share repurchase, Hayes said UTC would still have the ability to make acquisitions.
"We're looking at those deals in the $1 to $5 billion range and clearly we have the capacity to continue to do those deals," Hayes said.