Wednesday, May 02, 2012

United Technologies (UTX) 2012 Review

United Technologies (UTX) is an industrial conglomerate which manufacturers and services aircraft engines (Pratt & Whitney), manufacturers heating, ventilating and air conditioning equipment (Carrier), manufacturers and services elevators (Otis), builds helicopters (Sikorsky) and manufacturers aerospace and industrial products (Hamilton Sundstrand).

The company has earned an 18-20% return on equity over the last ten years while growing profits and dividends at a 14-15% rate. While UTX’s businesses were impacted by the global economic slowdown, the company has returned to its historical growth rate because:

(1) its main businesses possess a large parts and service component which adds stability to earnings,

(2) the pending acquisition of Goodrich should add to earnings per share growth,

(3) its strong cash flow allows for further acquisitions.


(1) a significant portion of its business is subject to government funding,

(2) its international operations are subject changes in foreign economies growth rates as well as currency fluctuations and government regulations,

UTX is rated A++ by Value Line, its balance sheet carries a debt/equity ratio of 29%, its stock yields 2.5%.

Statistical Summary

Stock Yield Dividend Growth Rate Payout Ratio # Increases Since 2002
UTX 2.5% 11% 34% 10

Debt/Equity ROE EPS Down Since 2002 Net Margin Value Line Rating
UTX 29% 22% 1 9% A++

*Because the market segments in which these companies operate are so diverse, comparable data would be meaningless.


Note: UTX stock made good progress off its March 2009 low, surpassing the downtrend off its October 2007 high (red line) and the November 2008 trading high (green line), Long term, the stock is in an uptrend (straight blue lines). Intermediate term, it is in a trading range (purple lines). Until very recently, UTX was in a short term uptrend (brown line). The wiggly blue line is on balance volume. The Dividend Growth Portfolio owns a 75% position in UTX. The upper boundary of its Buy Value Range is $64; the lower boundary of its Sell Half Range is $105.

Steve Cook received his education in investments from Harvard, where he earned an MBA, New York University, where he did post graduate work in economics and financial analysis and the CFA Institute, where he earned the Chartered Financial Analysts designation in 1973. His 40 years of investment experience includes institutional portfolio management at Scudder, Stevens and Clark and Bear Stearns. Steve's goal at Strategic Stock Investments is to help other investors build wealth and benefit from the investing lessons he learned the hard way.