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United Technologies' PT6A Gets Higher Cycle Limits Approval

United Technologies Corporation’s UTX business subsidiary, Pratt & Whitney Canada, recently secured an approval from Transport Canada to augment cycle limits on its premium PT6A-140, -140A and -140AG engines. This approval to increase cycle limits will aid it in extending the life of Low Cycle Fatigue (LCF) parts like compressor, power turbine disks and impeller.

Inside the Headlines

Pratt & Whitney is a renowned designer and manufacturer of helicopter as well as aircraft auxiliary power units, and engines. This premium business arm of United Technologies persistently tries to develop innovative solutions that aid in lowering customers’ maintenance and operating costs. The aforementioned approval will significantly aid Pratt & Whitney in lowering LCF parts’ replacement requirements, and hence be highly cost effective to its users going forward.

On account of the approval, cycle limits of PT6A-140-series engines have been boosted to 60%. This includes an increment of 4000 cycles for power turbine disk, 6000 cycles for compressor turbine disk and 10000 cycles for the impeller.

The company noted that the existing cycle limits on its PT6A engines will not control the timing of an overhaul but will definitely indicate the need to repair or replace a particular part.  Hence, an augmentation in cycle limits will certainly improve the durability and performance efficiency of Pratt & Whitney’s PT6A engines.

Our Take

Of late, United Technologies is poised to grow on the back of Rockwell Collins, Inc. COL acquisition (closed in Nov 26, 2018), sturdier aerospace business, increased construction spending in the United States, as well as continued growth in refrigeration and heating, ventilation, and air conditioning (HVAC) end markets’ demand. Moreover, the strategic decision to split its business into three separate independent companies will likely strengthen the company’s financial flexibility and commercial competency, going forward.

However, we notice that shares of this Zacks Rank #3 (Hold) company have lost 2.3% over the past month, wider than 1% decline of the industry it belongs to.

 

 

Material cost inflation (on account of tariffs imposed on U.S. imports), higher logistics expenses and ongoing restructuring costs might continue to escalate aggregate cost, thereby hurting United Technologies’ near-term margins. Moreover, weakening Otis segment’s performance remains a major cause of concern for the stock.

Stocks to Consider

Two better-ranked stocks within the same space are listed below:

Crane Co. CR currently carries a Zacks Rank #2 (Buy). The company pulled off average positive earnings surprise of 5.04% in the past four quarters. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Federal Signal Corporation FSS also holds a Zacks Rank of 2. The company pulled off average positive earnings surprise of 21.18% in the trailing four quarters.

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