Tuesday, 27 January 2015

United Technologies always signals something important

I have observed this before but United Technologies really is a benchmark stock to follow.  They have such a range of businesses that their quarterly results presentations always say something interesting.

Back in late October I noted the company's interestingly balanced outlook chart...

...and observed fundamentally that '...the 4%+ free cash flow yield is pleasant and most this comes back to investors via the dividend/buyback and a prospective c. x11 EV/ebit rating is not huge.  Am I however really excited?  Back at that US$100 level maybe but otherwise I am staying on the sidelines'.  

Since then the shares have generally just pushed up...until today:

Fundamentally what caught the eye was the fall in commercial aftermarket sales at the aircraft engine company Pratt & Whitney...

...but generally the numbers read well with EPS up 10% assisted by 'all segments growing organically and the segment operating margin up 90 bps to 16.6%'. 

The challenges come however with the 2015 outlook and this is via an exogenous factor (which has been a recent theme we have discussed at length here at Financial Orbit): the strong US dollar: 

It is interesting how this has impacted 2015 earnings.  Despite some benefits from buybacks the net impact has been to pull hopes back by a couple of percent.  United Technologies will still grow EPS year-on-year on an estimated basis (c. +3%)

Let's go back to where I started.  We are still going to have to see a lower United Technologies share price to make the stock really interesting (first re-look sub US$110 but nearer US$100 even more interesting).  But the big headline is surely the impact of the higher US dollar.  More generally I fear that this chart is surely going to show further compression...and that's not good for the broader markets.  

1 comment:

  1. On the whole, UTX stock got exposure by twenty four analysts which gave the company a mean price target of $133.50. Stock has been rated as Buy by nearly 75% of the analysts while 25% of the remaining analysts rate it as Hold.