United Technologies falls on forecast as Sikorsky to be shed

NEW YORK – United Technologies Corp. dropped the most in three months after lowering its 2015 profit target amid weakness at the Sikorsky helicopter unit being targeted for divestiture.

Sikorsky’s operating profit will be down as much as $125 million on lower deliveries to the oil-and-gas industry, the company said Monday, scrapping a prediction for a gain of as much as $25 million. The slump may affect the choice between a sale and a spinoff.

“We’ll have the decision on spin versus sale done, I think, in about 60 days – probably by the end of July,” CEO Gregory Hayes told investors on a conference call at the Paris Air Show.

While investors knew Sikorsky was struggling with sales, they weren’t anticipating the reduction in United Technologies’ earnings expectations, Nick Heymann, an analyst with William Blair & Co., wrote in a note to clients.

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United Technologies fell 2.5 percent, the most among stocks on the Dow Jones Industrial Average, to $114.61 at the close in New York. The percentage decline was the largest since March 10.

Including Sikorsky, United Technologies said earnings will be $6.55 to $6.85 a share this year, down from $6.85 to $7.05. The drop includes a one-time separation cost for Sikorsky of 10 cents to 20 cents. Without Sikorsky, 2015 will be $6.35 to $6.55 a share on sales of as much as $59 billion.

Textron watches

Textron Inc., which sells Bell helicopters and Cessna jets, is among the companies closely watching the separation of Sikorsky, the 90-year-old maker of the Black Hawk military helicopter and the rotorcraft that carry U.S. presidents. Sikorsky had $7.5 billion in sales last year.

“We’ll see what happens,” Textron CEO Scott Donnelly said in an interview at the air show, while declining to say whether the Providence, R.I.-based company had submitted a bid.

Heymann said the sale or spinoff of Sikorsky would provide United Technologies with “significant additional financial flexibility” of as much as $4 billion to fund acquisitions.

“While we previously believed that a tax-free spinout was more probable, the chances the business might be sold have increased in recent months,” Heymann said in his note. He rates United Technologies as market perform.

Cutting ties with Sikorsky will help Hayes put his stamp on a company with a product lineup spanning jet engines, elevators and air conditioners. Previously chief financial officer, he took over in November following the resignation of Louis Chenevert.

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