United Technologies delivered solid second-quarter earnings of $1.70 per share, a 4% improvement versus the prior year after adjusting for gains in both the current and prior period. Organic sales were flat versus the prior year, with aerospace segments outpacing climate and Sikorskey.

The key developments from the quarter have been the continuing expansion of the order book, which helps to add clarity to 2014 and beyond, as well as reported strength in China. Over the last quarter analysts had received mixed messages from the region, but through this point in the earnings cycle, only a handful of diversified industrial firms have reported mediocre or worse results.

Operating margins were essentially flat year over year although gains in both periods muddied comparisons for individual segments. As expected, Pratt’s core operating margins declined versus the prior year because of higher launch costs associated with the geared turbo fan engine. Analysts remain impressed with the progress the company has made with the climate, controls, and security business, driving margin expansion and eliminating lower-margin, lower-growth businesses.

United Technologies’ ability to integrate and create new growth platforms with the acquisitions underscores the wide Morningstar Economic Moat Rating for the company and this quarter’s result does little to change their opinion.


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