United Technologies Falls Short with Pratt & Whitney Deliveries



United Technologies reduces Pratt & Whitney deliveries guidance

United Technologies (UTX) earlier maintained that Pratt & Whitney was scheduled to deliver 200 geared turbofan (or GTF) engines in 2016. However, at the Morgan Stanley (MS) Laguna Conference in September, UTX reduced this number to about 150 deliveries.

UTX’s CEO, Gregory Hayes, attributed the delays to some of the parts, especially the fan blade, in the GTF engines. The engines’ new aluminum titanium blades are manufactured in different regions of the world and are assembled in one location. Hayes stated that UTX has struggled due to the precision and technology in the blades, which take the company 60 days to build when they should take only 30.

The company has delivered 80 engines year-to-date and intends to ship another 70 in 4Q16. This ramp-up in the number of deliveries is still significant. UTX delivered 14 engines last year. It expects to ship to 150 this year and around 350–400 in 2017.

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General Electric eyes the prized F-35 contract

Pratt & Whitney is the sole engine supplier to Lockheed Martin’s (LMT) F-35 fighter jets, delivering 40 engines for ~$15 million per piece and representing 31% of new engine revenue in 2015. 

Its number of deliveries is expected to rise to 200 by 2020. However, General Electric (GE), which lost out to Pratt & Whitney on the F-35 contract in 2011, has been trying to get back in the game through an engine upgrade that could enter service in the mid-2020s.

Both Pratt & Whitney and General Electric have been participating in the early stages of the Adaptive Engine program being funded by the US Air Force. GE intends to produce three test engines by 2019.

In the aerospace industry, investors can also check out our pre-earnings series on Textron (TXT) and Northrop Grumman (NOC).


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