United Technologies Corporation (UTX) has bagged U.S. Navy contract updates totaling about $1 billion to provide engines for the multi-national F-35 fighter jet program.
The company is required to supply 18 engines for conventional take-off and landing planes and 19 for short takeoff/vertical landing F-35s.
The deal provides 15% savings on the conventional takeoff and landing carrier models. Deliveries are scheduled to start in the fourth quarter of 2011.
United Technologies has strong market positions in aerospace/defense and global infrastructure with a portfolio that includes: Carrier, Otis, Hamilton Sundstrand, Pratt & Whitney, Sikorsky and Fire & Security. The company invests in game-changing technology across the business, with its Aerospace companies continuing to make progress on their key development programs.
In addition to restructuring savings, the company is also seeing the benefits of other cost reduction actions in areas such as travel, furloughs and E&D employee attrition. The company’s cost reduction initiatives have led to a year-over-year increase in its consolidated and segment margins and have also expanded earnings.
The company’s most significant actions were at Carrier, related to ongoing portfolio transformation initiatives in overhead cost reduction projects, and at Hamilton Sundstrand, which continued to advance the low-cost sourcing strategy.
The financial performance of the company depends on conditions in the construction and aerospace industries. The company is also highly dependent on the U.S. government’s defense budget.
A reduction in capital spending in the commercial aviation or defense industries could have a significant effect on demand for UTX’s products, which could have an adverse effect on its financial performance or its results of operations. Its business may also be affected by government contracting risks.
United Technologies Corporation provides high technology products and services to the building systems and aerospace industries worldwide. Growth is attributable to acquisitions and the internal development of existing businesses.
Otis, Carrier and UTC Fire & Security (collectively referred to as the commercial businesses) serve customers in the commercial and residential property industries worldwide; Carrier also serves commercial, industrial, transport refrigeration and food service equipment customers.
Pratt & Whitney, Hamilton Sundstrand and Sikorsky (collectively referred to as the aerospace businesses) primarily serve commercial and government customers in both the original equipment and aftermarket parts and services markets of the aerospace industry. Hamilton Sundstrand and Pratt & Whitney also serve customers in certain industrial markets. Honeywell International Inc (HON) is a major competitor.
We currently have a Neutral recommendation on United Technologies Corporation.
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