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Why United Technologies Stock Fall After Second Quarter Earnings Release

|Includes: United Technologies Corporation (UTX)

The article discusses the reasons behind the United Technologies' stock price decline after 2Q earnings results.

United Technologies Corporation share price is trading under average, lately mainly because of cut in its third quarter earnings estimate for fiscal year 2015. The company posted second quarter earnings for fiscal year 2015, which led the share price to go down by 7% on July 21.

Over the past 30 days, the stock has fallen 10.23%, and stood at $99.41 on Tuesday. The key reason behind the fall in stock price is that the company cut its FY15 earnings per share guidance to $6.15 to $6.30 from $6.55 to $6.85. Furthermore, sales estimate for fiscal year 2015 were also condensed to $57 to $58 billion from $58 to $59 billion.

United Technologies tactically cut its guidance to integrate its sale of Sikorsky unit. Last month, UTX announced its Sikorsky segment sale to Lockheed Martin Corp. for $9 billion. The company cut its FY15 guidance because its division sales will not be a part of company's total revenues.

The reason behind the sale of unit was that it didn't meet the sales target of the year. Furthermore, people close to the matter don't think that Sikorsky was good fit for United's long term plans.

United Technologies reported $16.3 billion of revenues, and missed the consensus forecast by 1.29%. Furthermore, earnings per share came in at $1.81, and surpassed the estimates by nearly 5.48%. The Sikorsky division contributed around 10.3% in second quarter of fiscal year 2015, and indicated a drop compared to prior year's 13.8%.

The analysts now expect the Hartford based company to report third quarter fiscal year 2015 revenue at $15.2 billion, reflecting a 5.4% YoY decline, and was decreased from $16.5 billion estimated previously. Moreover, analysts expects EPS of $1.6, reflecting 20.5% YoY decline, and was also cut from previous forecast of $1.80.

At the moment, the company stock is trading 7.2% and 11.3% lower than its 50 and 100 day moving average price of $107.2 and $112.2, respectively.

Regarding future viewpoint, the analysts believe the share price to go up to $117 by the end of the year. In spite of the fall, fourteen out of twenty one analysts covering the stock of United Technologies recommend Buy, while seven suggested a Hold.

Because of the guidance reduction, the average trading volume of the company has also increased to 7.88 million shares from 3.86 million. Furthermore, the short interest also increased to 18.5 million from 10.6 million.