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United Technologies' Pratt Aims to Fix Airbus Engine Issue

Zacks Equity Research

Pratt & Whitney, a subsidiary of United Technologies Corporation UTX, has acknowledged technical glitches with respect to its newly modified turbofan jet engine. The discovery of these problems has caused the delivery of latest Airbus aircraft to come to a standstill. 

Taking the event into account, Europe’s air safety regulator issued an emergency warning to the company about inflight shutdown of such engines as these could lead to fatal consequences.

Pratt & Whitney reported that the issue affects 43 engines on A320neo aircraft and believes it to have occurred from an engineering change made to knife-edge seal in the high-pressure compressor near the rear of aircraft’s engine.           

United Technologies shares fell 3% last week following the news but has since recovered. The stock has outperformed the industry in the last three months, with an average return of 7.3% against a loss of 3.7% for the latter.

The incident hurt the company’s reputation as some investors were reluctant to park their money with it. Moreover, it hindered the growing demand for Airbus jet engines internationally as the deliveries were not made to the clients on time. Further, investors seem to be worried as to how the company would fix the relevant technical issues, come up with remedial measures and checks to avoid repetition of such incidents. Moving forward, Pratt & Whitney ensured Europe’s air safety regulator of its sheer determination to find and present a solution for the highlighted issue at the earliest. An early fix to these problems, as suggested by Pratt & Whitney, will likely help the company to mitigate risks related to its future revenue-generating potential and bottom-line growth.

United Technologies has a Zacks Rank #3 (Hold). Better-ranked stocks in the industry include Federal Signal Corporation FSS and Raven Industries, Inc. RAVN, sporting a Zacks Rank #1 (Strong Buy) and 3M Company MMM, carrying Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Federal Signal exceeded estimates thrice in the trailing four quarters with an average beat of 11.4%.

Raven has an expected long-term earnings growth rate of 10%. It exceeded estimates thrice in the trailing four quarters with an average beat of 25.8%. 

3M has an expected long-term earnings growth rate of 10.1%. It exceeded estimates thrice in the trailing four quarters with an average beat of 3.2%.

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