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United Technologies to Gain From Strong End Markets, Buyouts

Zacks Equity Research

On Aug 27, we issued an updated research report on United Technologies Corporation UTX.

Year to date, this Zacks Rank #2 (Buy) stock has gained 17.9%, compared with industry’s increase of 10.7%.

Existing Scenario

United Technologies has been benefiting from strength in commercial aftermarket and military businesses. With high defense spending and strong orders in the United States, prospects of the company's aerospace business look bright. Also, strong orders for the company’s Geared Turbofan engines and continued investment across aerospace products portfolio are likely to drive revenues of its aerospace business.

Also, the company intends to become more competent on the back of meaningful business acquisitions. In this regard, the buyout of Rockwell Collins (completed in November 2018) is worth mentioning. Notably, this deal has not only strengthened the company's existing product portfolio but has also aided in launching innovative solutions for aerospace customers. As a matter of fact, United Technologies expects about 50 cents of accretion to adjusted earnings per share from this acquisition in 2019.

In addition, United Technologies intends to separate its existing businesses into three entities. If the idea gets required approvals, the entities will be able to innovate, provide better customized solutions to customers and create greater value for shareholders.

Moreover, the company remains committed to rewarding shareholders handsomely through dividend payments and share buybacks. Notably, in the second quarter of 2019, the company paid out dividends worth $610 million to shareholders and repurchased approximately shares worth $40 million. It is worth noting that the quarterly dividend rate was hiked 5% in October 2018. Such diligent capital deployment strategies boost shareholders' wealth.

Analysts have also become increasingly bullish on United Technologies. In the past month, the Zacks Consensus Estimate for 2019 earnings has increased from $8.00 to $8.03 on account of three upward estimate revisions.

Other Key Picks

Some other top-ranked stocks from the same space are Federal Signal Corporation FSS, Griffon Corporation GFF and Carlisle Companies Incorporated CSL. While Federal Signal and Griffon currently sport a Zacks Rank #1 (Strong Buy), Carlisle carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Federal Signal pulled off average positive surprise of 16.48% in the last four quarters.

Griffon came up with average beat of 51.66% in the preceding four quarters.
Carlisle delivered average positive surprise of 17.16% in the trailing four quarters.

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Carlisle Companies Incorporated (CSL) : Free Stock Analysis Report
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