Morgan Stanley On United Technologies' Lowered Revision: 'It's Just Math'

United Technologies Corporation (NYSE: UTX) on Monday lowered its fiscal 2015 earnings per share outlook from $7.00 to $7.20 to $6.85 to $7.05, while reducing sales expectations from $66 billion to $67 billion to $65 billion to $66 billion due to a strong U.S. dollar outlook.

Nigel Coe of Morgan Stanley on Tuesday commented in a note that the company's revised guidance fully absorbs 24c of additional headwind from foreign exchange and assumes a euro rate of $1.10 – the most conservative estimate Coe has seen this earnings season.

“The lowered guidance range is likely to overshadow a pretty robust operating performance that pretty much hit the consensus bulls-eye,” Coe wrote. “Organic growth came in at four percent as predicted, but the company was facing a tough comp and sluggish top-line has been a major theme since the beginning of this recovery.”

Coe also notes that a 6 percent decline in Pratt after-market sales deserved “special attention” as it contrasts the 25 percent plus commercial aftermarket orders General Electric (NYSE: GE) reported.

Bottom line, “the stock was not priced for a negative revision and so the stock likely resets following a strong run,” Coe wrote, while pointing out the upcoming March 12 investor day is a potential catalyst event.

Shares are Overweight rated with an unchanged $128 price target.