Conservative stock United Technologies (UTX) is the name behind Otis elevators, Pratt & Whitney turbine enjines, UTC Aerospace, and Goodrich. UTX, which is part of the Dow Jones Industrial Average, had sales drop 5% last qtr, and profits fell 6%. The stock tanked from $110 to $99 as the company slashed earnings estimates. When the dust cleared analysts took their 2015 estimate down from $6.90 t0 $6.22. Ouch.
United Technologies recently sold Sikorsky hellecopters, which got it $10 in cash it can use to buy back stock or acquisitions, but that sale may have been bad as military conditions around the world are good for selling choppers. The company is having trouble selling jet engines and elevators. China’s weak and that’s hurting Otis.
Ten Year Chart
This ten year chart is not bad. 7% profit growth plus 2% yield means investors got 9% per year. UTX is a very conservative stock, Value Line ranks it #1 for safety.
But honestly, things looked a lot better last qtr. Then we thought profits would grow from $6.82 to $6.90. Not much, but better than the -9% analysts expect now. And since these figures just got slashed they could fall again next qtr.
Profit History
Right now UTX’s P/E is 16, which is what it has been the prior two years. But now profit growth is down, the stock should be on sale. It’s not. In fact I feel this $99 stock is worth $93.
Sharek’s Take
I’m bullish long-term on United Technologies, but for now the stock isn’t timely. Also, value picks aren’t moving up as growth stocks are getting all the attention, so buying and holding may have you holding for a while. I feel UTX is a good stock for the Conservative Growth Portfolio, but would recommend investors take just a small position (say half or 1/3rd) as I don’t think the stock will be moving higher for a while.
View the One Year Chart here. View the Earnings Table here.
