Industrial conglomerate United Technologies (NYSE: UTX) reported second quarter results earlier this week. Investors breathed a sigh of relief as sales growth appears to be returning to the firm’s far-flung global operations. Management continued to keep a tight lid on costs, too, which will prove helpful as it recovers from a difficult couple of years.

Second Quarter Sales Review

Sales improved 5% to $13.9 billion as organic sales grew 4% and acquisitions added another 1% to the top line. Four of the six primary operating segments reported sales growth. The Sikorsky unit and the Fire and Security segment both experienced solid 22% growth and accounted for approximately 12% of sales each. The Pratt & Whitney engine business (24% of sales) saw a 6% sales boost, while Carrier’s HVAC and related businesses (22%) eked out a 1% increase. Otis elevator (20%) reported a 4% top-line decline, and the Hamilton Sundstrand (10%) aerospace segment experienced a 1% drop.

Profit Recap

Despite the more mixed sales trends, operating profit improved in each division. Total divisional operating profit grew 18% to $2 billion as Fire and Security profits increased 200% to $168 million, and the Carrier segment improved 28% to $333 million. The worst-performing unit was Otis, which logged a 2% increase to account for 31% of total profits.

Subtracting corporate overhead reduced reported operating profits to $1.9 billion, which increased 18% to represent a very healthy 14% of sales. In management’s words, its “relentless focus on cost drove the segment operating margin to a record high”. Net income also grew 14% to $1.1 billion, or $1.20 per diluted share.

Competitive Landscape

United Technologies is officially a conglomerate and competes with the likes of Siemens (NYSE: SI) of Germany in a number of businesses. It also competes with Textron’s (NYSE: TXT) Bell helicopter unit and Danaher’s (NYSE: DHR) engine segments. The Carrier business goes head-to-head with Ingersoll-Rand’s (NYSE: IR) HVAC operations.

Outlook

Management cited improved orders during the first half of the year. This, coupled with cost cutting, allowed it to increase full-year earnings guidance to between $4.60 and $4.70 per share, for year-over-year growth of 12-14%. Analysts currently project sales growth of 2.9% to $54.4 billion for all of 2010.

Bottom Line

United Technologies continues to impress investors with its financial discipline. The last couple of years have been extremely difficult operating environments for many companies and for industrial manufacturers in particular. Lesser competitors, including Textron, which became wrapped up too heavily in financial services, will have a long road to rebuild their operations. Sales and profits did take a hit at United Technologies, but earnings are well on their way to surpassing the $5 per share reported in 2008. (To learn more, see Conglomerates: Risky Proposition?)

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