Segment margins for the fourth quarter are expected to be up approximately 120 basis points with pro forma earnings in the range of $1.37 to $1.42 per share, up 10% to 15% versus the prior year. As a reminder, we’re still planning a full year of 2014 tax rate of 26.5%, so that implies the Q4 tax rate to be approximately 28.8%.
Our Aerospace sales on a reported basis are expected to be down approximately 3% reflecting the year-over-year absence of friction materials in the quarter. On an organic basis sales are expected to be up approximately 2%, and as a reminder, in the fourth quarter of 2013 Aero recognized a significant IP litigation settlement resulting in a royalty gain of $63 million in Defense and Space that was offset by OEM payments in BGA. Both of these items were included and therefore netted out in sales and segment profit at the Aerospace level last year.
In the fourth quarter commercial OE sales are expected to be up mid-teens on a reported basis, and that’s mid-single-digit excluding the year-over-year impact I mentioned from the higher BGA OEM payments. The growth is driven by the favorable trend in demand for high-value business jet platforms where we have significant new engine content.
Commercial aftermarket sales are expected to be up low-single-digit in the quarter with an improvement in airline and business jet repair and overhaul activity as evidenced by the increase we’ve seen in shop receipts. However this strength will be partially offset by more modest spares growth driven by declines in BGA RMU activity that I mentioned earlier. Defense and space sales are expected to be up slightly, excluding the impact of the royalty gain in the fourth quarter of 2013 that I discussed earlier.
In Transportation Systems we’re expecting sales to be approximately flat on an organic basis primarily due to challenging comparisons to prior year. You’ll recall that in the fourth quarter of 2013 TS was up 15%. We’re expecting Transportation Systems to have good volume growth in the first quarter of 2015 driven primarily by new launches entering the market.
As for Aerospace margins we expect an increase of approximately 200 basis points in the fourth quarter driven by significant productivity improvements across the portfolio and commercial excellence. Continued focus on driving productivity and direct material costs and the benefits from functional transformation are helping us to support the growth investments we’re making in the business as well as to drive the improvement in profitability.
For ACS, sales are expected to be up approximately 4% on an organic basis, excluding an approximate 2% headwind from FX. We expect both ESS and BSD to grow in the low- to mid-single digit range on an organic basis, supported by the trends we’re seeing in our short-cycle order rates. This is also supported by continued growth in our projects backlog and the service bank in Billing Solutions that we mentioned earlier.
ACS margins are expected to be up approximately 60 basis points with continued benefits from productivity net of inflation and commercial excellence, while accelerating investments for growth in new product areas such as connected homes and in high-growth regions.
In PMT, sales are expected to be up approximately 2% on an organic basis. The strong and improving growth rates we have seen throughout the year across the PMT portfolio, including in the fourth quarter are being temporarily offset by the previously signaled decline in UOP sales for the fourth quarter in the range of 8% to 9%. And to remind you we had an exceptionally strong fourth quarter in 2013 for UOP where sales were up 17% organically – needless to say a difficult comparison.
On the other hand, a higher mix of licensing revenue in the fourth quarter will result in a tailwind to UOP and PMT margins.
In HPS, the favorable orders and backlog growth will support Q4 sales acceleration which will also carry into 2015. HPS margin expansion will also continue. In Advanced Materials we anticipate another quarter of broad sales growth. However Resins and Chemicals will continue to face lower margin rates exacerbated by planned plant outages and price raw pressures. Overall PMT margins in the quarter are expected to be up approximately 60 basis points versus 2013 driven by UOP and HPS.
Let me move to Slide 9 where I’d like to refresh everyone on our full-year outlook for 2014.
As you know we take a conservative view on sales expectations. This approach continues to serve us well because it forces us to also be prudent on our cost structure, so if sales grow better than our conservative expectations we tend to do very well. I think 2014 demonstrates this. Our sales are coming in a little better than where we planned whereas we’ve raised our EPS guidance three times during the year.
As Dave indicated we are taking EPS guidance up a third time, this time to a range of $5.50 to $5.55, up 11% to 12% over 2013 – so another year of double-digit earnings growth. This is our planning model and we’ll continue to follow it.
As you see on the page we’ve tightened our sales range to $40.3 billion to $40.4 billion, up approximately 3% to 4% versus the prior year. And as for segment margins we’re expecting the full year to be approximately 17% or up 70 basis points over 2013. Again, this puts us at or above the high end of the sales and margin guidance we shared with you last December.
The full year outlook by individual segment is similar to what we shared in July. Considering the performance year-to-date we continue to feel confident in the segment margins for each business: 19.5% for Aero, 15.0% for ACS and 18.0% for PMT – strong performance across the portfolio with every business contributing to the 70 basis points of segment margin expansion.
While there’s still work to do to ensure we deliver 2014 we have commenced our 2015 planning. On Slides 10 and 11 I’ll walk you through some of our key planning assumptions and initial thoughts by business.
While it’s still early, Slide 10 lays out some of our current views.