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United Technologies reports strong 3Q revenue growth, but headwinds from Trump's tariffs to worsen in 2019

Tariffs imposed by the Trump administration are costing and the industrial conglmerate, and the situation could easily worsen in 2019
United Technology Corp sign
United Technologies operates in the commercial aerospace, defense and building industries

United Technologies Corporation (NYSE:UTX) reported robust beats on both earnings per share and revenue in the third quarter on Tuesday, but its chief executive warned that the impact of tariffs slapped by the Trump administration with trading partners and China are going to get worse in 2019.

"We are keeping a close eye on the global economy ... the geopolitical environment is our biggest concern," Gregory Hayes, chairman and CEO of United Technologies, said during the conference call after the company released its results.

The tariffs imposed by US President Donald Trump, especially his rambling trade war with China, has caused a $0.05 headwind in 2018, he said.

"As we look to 2019, if the tariffs remain in place, we see a 15 cent incremental headwind," Hayes said, adding United will try to take measures to "mitigate" its effect on its operations.

READ: Micron Technology shares slip after CFO says Trump's tariffs will hit business

The company, a producer of jet engines and elevators, reported strong third-quarter earnings and raised its guidance for the rest of 2018.

Earnings per share came in at $1.92, up from $1.73 in the year-ago quarter, and above the consensus expectation of $1.82. Quarterly revenues hit $16.5 billion, from $15.45 billion a year ago and the expectation of $16.15 billion.

"Organic sales growth of 8 percent is further proof that our investments in innovation are paying off across all of our businesses," said Hayes.

"We are well positioned to close out the year as we continue to execute on our strategic priorities. The acquisition of Rockwell Collins, once complete, will further strengthen our position as a premier systems supplier to the aerospace industry."

Rockwell Collins is a company that provides avionics and information technology systems to government agencies and aircraft manufacturers. It was acquired by United Technologies in September 2017.

Shares of United Technology rose 1.5% to $128.29.

READ: United Technologies 2Q earnings beat Street as sales grow in all major divisions

"We see solid long-term fundamentals across all of our business," Hayes said. As a result, the company raised its guidance.

The adjusted EPS was increased to $7.20 to $7.30, up from $7.10 to $7.25. Total sales were forecast at $64 to $64.5 billion, up from $63.5 to $64.5 billion. Organic sales growth was seen at 6%, from 5% to 6%.

The Farmington, Connecticut company operates in the commercial aerospace, defense and building industries.

Reporting by Rene Pastor, contactable on [email protected]

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