Shares of United Technologies Corp (UTX) hit a 52-week high of $118.42 during yesterday’s trading session. However, the stock closed the session a notch lower at $117.41 with a year-over-year growth of 28.9%. The average trading volume aggregated 3.7 million shares.
Despite its strong price appreciation, this Zacks Rank #3 (Hold) stock still has enough fundamentals that may further drive it upward. The stock is currently trading at a forward P/E of 17.2x. United Technologies expects organic growth and order volume to continue to accelerate in 2014 and beyond.
Growth Drivers
United Technologies reported fourth quarter 2013 earnings from continuing operations of $1.58 per share, up from $1.04 in the year-ago quarter. The surge in earnings was driven by an increase in revenues.
United Technologies is flourishing on lucrative contracts for jet engine replacements and fresh demand for helicopters in the public services sector. It is investing heavily in technological innovation to come up with new products to fend competition. The aerospace sector, thereby, is witnessing healthy growth.
While Sikorsky, a unit of United Technologies, is the Pentagon’s leading helicopter supplier, Pratt & Whitney is a dominant player in the worldwide helicopter market and is recognized for outstanding reliability, durability and exceptional operating economics.
Recently Pratt & Whitney Canada (P&WC) and Milestone Aviation Group, a global leader in helicopter leasing, announced a $75 million, 15-year agreement under which P&WC will offer its Flexible Turboshaft Engine Fleet Management program to Milestone customers.
United Technologies serves various end-markets such as aerospace, defense and commercial construction, which move according to their own cycles. This business mix and diversification allow the company to remain profitable even during tough economic times, delivering consistent earnings and dividend growth. The company has an experienced management team that is likely to capitalize on the continued global economic recovery and deliver sustainable earnings growth in 2014 as well as in future.
United Technologies has a strong balance sheet with adequate liquidity to fuel its growth engine. The company generates strong free cash flow. The cash flow allows management to invest in product innovations, acquisitions and business development. The company continues to invest in innovative new products delivering value to its customers and securing orders that are likely to drive top-line growth in future.
Estimate Revisions
Over the last 7 days, earnings estimates revisions remained static for 2014. Although there is a lacuna of estimate revisions, we envision an uptrend for the stock backed by its strong growth potential.
Other Stocks to Consider
Other stocks that look promising and are worth a look are Mitsubishi Corporation. (MSBHY), Marubeni Corporation. (MARUY) and 3M Company (MMM), each carrying a Zacks Rank #2 (Buy).
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