United Technologies (UTX)
By Timothy Lutts, Chief Analyst of Cabot Stock of the Month
From Cabot Wealth Advisory 9/15/15 Sign up for Cabot Wealth Advisory—it’s free!
If you’re interested in buying value, and you have the patience to hold for a year or two or three, then maybe this stock is for you.
United Technologies (UTX) is a big company with five divisions: Otis Elevator; UTC Climate, Controls and Security; Pratt & Whitney; UTC Aerospace Systems and Sikorsky Helicopters.
The company’s growth is minimal now, not least because of the slowdown in China, but management isn’t sitting still.
In July, they announced an agreement to sell Sikorsky Helicopters to Lockheed Martin for $9 billion, and there’s little doubt they’ll use the proceeds to invest in smaller, faster-growing companies.
You can see the stock’s drop in reaction to the news. Before the announcement, UTX was trading at 110; now it’s down 16% from that level.
But the stock pays a hefty dividend of 2.8%. It’s been increasing its dividend for every one of the past 21 years. And Roy Ward of Cabot Benjamin Graham Value Investor says the stock is cheap.
But there’s one catch.
As with all of Roy’s value recommendations, there’s a Maximum Buy Price, and you don’t want to pay more than that price, as that reduces your Margin of Safety, while decreasing your potential profit.
So if you’re really interested in United Technologies, as well as other great low-risk value stocks, I recommend that you learn more about Cabot Benjamin Graham Value Investor.
Note: since 1995, Roy’s Cabot Value Model has provided an impressive return of 1,036% compared to a return of 508% for Warren Buffett’s Berkshire Hathaway! During the same 19-year period, the Dow has gained just 218%.
The first step is to click here.
From Cabot Wealth Advisory 10/21/14 Sign up for Cabot Wealth Advisory—it’s free!
United Technologies (UTX) is a multi-industry holding company that conducts business through five divisions: Otis Elevator; UTC Climate, Controls & Security; Pratt & Whitney; UTC Aerospace Systems and Sikorsky Helicopters.
Otis Elevator (20% of 2013 sales) is the world's largest manufacturer of elevators, escalators and moving walkways. International revenues were 82% of the division's revenues in 2013.
UTC Climate, Controls & Security (27% of sales) is the world’s leading provider of HVAC (heating, ventilating, and air conditioning) and refrigeration equipment. Products and services are sold under the Carrier and other brand names. The division also makes and services security and fire safety products, including intruder alarms, video surveillance systems, and fire detection alarms. International sales were 61% of total Climate, Controls & Security revenues in 2013.
Pratt & Whitney (23% of sales) is a leading supplier of aircraft engines for large commercial aircraft, business jets, and military fighter and transport aircraft.
UTC Aerospace Systems (21% of sales), which was formed from the purchases of Hamilton Sundstrand and Goodrich, is a leading supplier of a wide array of technologically advanced aerospace products and services. Sales to Boeing and Airbus, which are UTC Aerospace Systems' two largest non- governmental customers by sales, were 20% of the division's sales in 2013. Sales to the U.S. Government were 21% of division sales in 2013.
Sikorsky (9% of sales) is the world's largest manufacturer of military and commercial helicopters, including the world-famous Black Hawk helicopter. International revenues were 30% of division revenues in 2013 and U.S. government sales were 58%.
Sales increased 4% to $65 billion during the 12 months ended 9/30/14 while EPS rose 16%. Strong demand for many of United Technologies’ products and services was partially offset by divestitures of slower growing, less profitable segments. Management’s cost-cutting programs bolstered earnings. Sales will likely climb 5% and EPS will advance 13% in the next 12 months to $7.50. The company’s broad product mix, and substantial and steady parts and service business will provide dependable growth in future years.
UTX has paid dividends consecutively since 1975 and has increased its dividend every year for 20 years. Another dividend hike is expected by the end of 2014. The company’s payout ratio (dividend divided by earnings) is 36%, well below my 50% upper limit. United Technologies is a blue-chip company that is well worth buying for long-term investment.
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|United Technologies Corporation (UTX)
One Financial Plaza
Hartford, Connecticut 06101
|Index Membership: N/A
Sector: Industrial Goods
Industry: Aerospace/Defense Products & Services
Full Time Employees: 212,400
10/21/14 United Technologies (UTX): Dependable growth