What happens next Where's my refund? Best CD rates this month Shop and save 🤑
MONEY
United Technologies

United Technologies plunges on profit warning

Nathan Bomey
USA TODAY
Workers walk outside of Sikorsky Aircraft, in Stratford, Conn.

Manufacturer United Technologies (UTX) warned that it will seek to cut costs after projecting that its operating profit will miss expectations for 2015, disappointing Wall Street and sending the company's stock plunging.

The company, whose stock is a component of the Dow Jones industrial average, suffered declining revenue and net income for the second quarter and lowered its outlook for the full year as weakness in China and Europe take a toll on sales of elevators and aerospace products.

Net sales fell 5% to $16.3 billion, and net income fell 8% to $1.64 billion.

"We're going to take a hard look at restructuring," UTC CEO Gregory Hayes said in a conference call.

He said the company would also devote capital to share buybacks and mergers and acquisitions, with a preference for M&A to drive growth.

Shares plummeted 7% to close at $102.71 Tuesday.

"To say I’m disappointed would be a significant understatement. I’m tired of delivering bad news," Hayes said. "We don’t want to overpromise and underdeliver."

The disappointing earnings report comes a day after UTC announced it would sell its Black Hawk-making Sikorsky Aircraft division to Lockheed Martin for $9 billion.

That deal is expected to close by late 2015 or early 2016.

The company's Otis division, which makes elevators and escalators, will record 2015 operating profit of $300 million to $350 million less than in 2014, Hayes said.

He also said the commercial aftermarket in the company's aerospace systems division "will be significantly below our expectations for the year," with profit down $25 million to $75 million.

"It’s tough to do. It’s tough to get this bad news out," Hayes said.

Still, a deeper look at the UTC earnings report reveals mixed messages. There's short-term weakness, but "sustainable organic growth" on the horizon, Hayes said.

"We’re better positioned to drive long-term shareholder value," he said.

But a truism on Wall Street continues to reverberate: Investors value short-term growth over long-term outlooks.

In the short term, a fallback in elevator demand in China, where investors sent the stock market plunging in recent weeks, has taken a bit out of UTC.

Otis orders in China fell 10% for the quarter. Overall revenue fell 8% in the Otis division to $3.1 billion.

The struggles in China reveal how a slowdown in the world's second-largest economy can directly undermine the U.S. With lower elevator sales, UTC is now considering restructuring costs across its business, which could involve job cuts.

Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.

Featured Weekly Ad