With concerns over sequestration hanging over his Sikorsky Aircraft, Pratt & Whitney and UTC Aerospace systems subsidiaries, Louis Chenevert, chief executive officer and chairman of United Technologies, said the company is prepared for a 10 cent hit to earnings per share in a worst case scenario.
Chenevert, speaking at the Barclays Conference, was in step with his CFO Greg Hayes, who spoke a week earlier at another conference espousing similar expectations that automatic defense spending cuts will happen in D.C. as Congress fails to reach a deal over the budget.
But UTC isn’t expecting catastrophe from sequestration for Sikorsky or Pratt.
“Sikorsky locked up Black Hawk volumes on multi-year 8,” Chenevert said, of the $8.5 billion deal the Stratford helicopter maker announced in July 2012. “We got five years of volume.”
He said he doesn’t expect much impact on UTC from sequestration in 2013, but a 10 cent impact on earnings per share was possible in a worst case scenario. This would still be withing the company’s financial guidance, however.
Overall, the top executive at UTC said, “I’m pleased with the programs we are on.”
Besides Black Hawk, he specifically mentioned the 53K, which Sikorsky is building for the Marines and the Joint Strike Fighter, which Pratt is the sole provider of engines and which UTC’s Aerospace division makes a variety of components for.
Analysts at Forecast International and The Teal Group have both said the Black Hawk is viewed as a must have contract for the military as is the 53K, which is for the Marines and is the Pentagon’s only new program.
Chenevert said he does expect impact on the afterparts business for the military.
During the conference, Chenevert also addressed concerns about the Canadian maritime helicopter deal and was in
line with analysts, who have said despite fines and penalties, the Cyclone would ultimately provide a stage to show off the military variant of Sikorsky’s S-92.
“We are fully committed,” he said, to building “the most capable helicopter in the world”
While the company works with the Canadians over details of the contract, Chenevert was confident the Cyclone would be a win for Sikorsky and UTC.
“Other countries see what the helicopter is doing and salivate about it,” he said.
And while there has been talk about the delays and fines to the program, he noted that aircraft 26 of 28 is already on the line and being built. Four of the aircraft have been delivered and maintenance training has started in Canada.