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United Technologies-Middleby Ink Deal for Taylor Company Sale

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Proteostasis (PTI) delivered earnings and revenue surprises of -8.70% and 27.88%, respectively, for the quarter ended September 2018. Do the numbers hold clues to what lies ahead for the stock?

United Technologies Corporation’s UTX operating segment — Climate, Controls & Security — recently entered into a definitive agreement with The Middleby Corporation MIDD. Per the deal, this segment will sell Taylor Company to Middleby — a manufacturer of commercial foodservice equipment. This $1 billion deal is expected to close early in the third quarter of 2018.

Our Take

United Technologies serves various end-markets such as aerospace, defense and commercial construction. This business mix and diversification allows the company to generate profit even during tough economic times by delivering consistent earnings and dividend growth. Also, the company’s continuous investment in innovative products, through higher engineering expenditures, secures orders that might drive the top line in future.

In the past six months, shares of United Technologies have gained 7.2% against the industry’s decline of 6.2%.

 

 

Moreover, the company’s strong aftermarket services business remains relatively stable compared to new product delivery. This, in turn, helps United Technologies to offset the impact of downturns in the new products market. For instance, in first-quarter 2018, its aftermarket business witnessed robust sales across the segments with commercial and military up 18% and 13%, respectively.

Meanwhile, the company also revamped its aerospace unit, including an overhaul of its organizational structure. Per United Technologies, its streamlined organizational set-up might enable the company to better serve its customers.

However, the Zacks Rank #3 (Hold) company relies on suppliers, including third-party contract manufacturing and commodity markets, to secure raw materials, parts, components and sub-systems. Therefore, any disruption in deliveries from suppliers, capacity constraints, production disruptions, price changes, or decreased availability of raw materials or commodities may adversely impact United Technologies’ ability to meet delivery schedules and increase operating costs.

Stocks to Consider

Some better-ranked stocks from the same space are Honeywell International Inc. HON and Danaher Corporation DHR. Both these companies carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Honeywell surpassed estimates in the trailing four quarters, with an average positive earnings surprise of 1.5%.

Danaher exceeded estimates in the trailing four quarters, with an average positive earnings surprise of 4.1%.

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Danaher Corporation (DHR) : Free Stock Analysis Report
 
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The Middleby Corporation (MIDD) : Free Stock Analysis Report
 
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