United Technologies Corp announced lower forecast for 2015, as the new CEO considers the value of existing business and the possibility of acquisitions.
After the unannounced departure of Louis Chenevert, Greg Hayes took over as the new CEO of United Technologies. Following his appointment, Mr. Hayes admitted that investor returns had “not been very good” during the past two years and that he would take actions to ensure that the company improves shareholder value.
“We’re going to be more aggressive,” Mr. Hayes said of acquisitions and divestments cited by the Financial Times. “We’re going to be more forceful. We’re going to work harder to bring these deals home.”
Mr. Hayes has acknowledged the company has fallen behind competitors in stock price gains, which may attract a possible intervention from activist shareholders. Adding that he would re-evaluate the companys portfolio of businesses and look for possible sell-offs and purchases.
“They’ve got $220 billion of money looking for something to do,” Mr. Hayes said referring to activist firms. “It’s a tough couple of years ahead of us.”
There has been a lot of speculations around Sikorsky helicopters that the company might be looking to dispose of the unit. Initially Mr. Hayes discarded such actions, but later said: “I say Sikorsky isn’t for sale — anything’s for sale at the right price.”
Under the changes the company will buy-back a maximum of $3 billion worth of shares, Mr. Hayes said. Also United Technologies will be looking for new acquisitions in the sake of shareholder returns.
“We’ve done $22 billion of acquisitions in the last couple of years, we’ve done $8 billion of divestitures, but we’re never ever done,” Mr. Hayes said.
Analysts have been wondering whether United Technologies would start offering turbofan engines for widebody planes. However, Mr. Hayes said that there would be no investments in widebody engines for now, as such action would significantly hurt earnings.
Typically engine makers sell their products at a low margin and they bet on maintenance services, or the “after market” to make it worth their while.
Mr. Hayes said that narrowbody planes fly more frequently than their widebody counterpart, and thus providing more work for the engine. “As a result, the aftermarket potential I think on narrowbody is much greater than what it is on the widebody,” he said.
For 2014, the company said it expects earnings per share to land at $6.80, in line with it forecast of between $6.75 and $6.85. The forecast includes a charge of $0.25 due to a provision related to a tax case in Germany, partially offset by around $0.20 “of favorable items”, the company said as it reaffirmed its projection of $65 million in sales.
For 2015, United Technologies expects earnings per share to range between $7.00 to $7.20, below expectations, with sales of $66 billion to $67 billion. Mr. Hayes described the projection as “disappointing.”
United Technologies Corp gained 0.48% on Thursday and closed at $114.04 in New York. However, on Friday the stock fell 1.53% in the after hours trading at 12:57 GMT. The company is valued at $103.47 billion.
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