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United Technologies CEO Steps Down amid Engine Setbacks

In a move that shocked Wall Street, aerospace and building systems giant United Technologies Corporation (UTX) announced that CEO Louis Chenever was retiring and current CFO Gregory Hayes will succeed him. While the company did not offer any reason behind the sudden change in positions, a company spokesman asserted that it was not related to financial performance.

Chenever will also step down from his post as the Chairman, and his retirement from both posts is effective immediately.

Chenever led the industrial conglomerate for six years, and pioneered the company’s strategic makeover, by betting on new jet-engine technology and the swift urbanization of emerging markets, especially China. His most celebrated feat was United Technologies' $18.4 billion purchase of aerospace parts maker Goodrich Corp. in 2012. The deal enabled the company to establish a strong foothold in the lucrative commercial airline business and enhanced its focus in the aerospace sector.

United Technologies is the parent company of units such as Sikorsky helicopters, jet engine manufacturer Pratt & Whitney, Otis elevators and other aerospace and building systems companies.

The impromptu announcement comes as the company strives to boost growth across many of its key businesses. The company has been struggling in recent quarters as order growth remains weak and margins continue to disappoint.

United Technologies also suffered quite a few high-profile setbacks this year. In May, plane-maker Bombardier’s CSeries test flight program was grounded after one of Pratt & Whitney's new geared turbofan commercial engines failed.

An even more upsetting incident took place in June when the entire fleet of the Pentagon's new F-35 fighter planes was temporarily grounded following an engine blowout. Notably, Pratt & Whitney provides the sole engine for Lockheed Martin Corporation’s (LMT) F-35 Joint Strike Fighter.

Meanwhile, Pratt & Whitney competes with engines manufacturers like General Electric’s (GE) unit GE Aviation, Rolls-Royce, Honeywell International Inc. (HON), Turbomeca, and CFM International.

Additionally, significant cutbacks in U.S. military spare parts orders impacted Sikorsky’s operations last year as federal budget sequestration hampered military business.

Gregory Hayes takes the helm as the head of United Technologies as the company launches a major new engine program in Pratt & Whitney and strives to boost its Otis elevator business in China.

United Technologies also reiterated its guidance for 2014, with revenues projected at about $65 billion and earnings per share expected in the range of $6.75 to $6.85. The Zacks Consensus Estimate for 2014 currently stands higher at $6.87.

United Technologies currently carries a Zacks rank #3 (Hold).

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