Shares of industrial goods manufacturer United Technologies CorporationUTX scaled a new 52-week high of $109.83 on Aug 15, before closing the trading session a notch lower at $109.69 for a healthy year-to-date return of 14.2%. Barring minor hiccups, United Technologies' share price has steadily been on an uptrend since July this year.
Despite its strong price appreciation, this Zacks Rank #3 (Hold) stock has the wherewithal to continue its growth curve. The stock is currently trading at a forward P/E of 16.5x and has long-term earnings growth expectation of 8.7%.
United Technologies reported solid second-quarter 2016 results with adjusted income (from continuing operations) of $1,508 million or $1.82 per share compared with $1,485 million or $1.67 per share in the year-ago quarter. The year-over-year increase in earnings was primarily due to higher revenues. Adjusted earnings for the reported quarter significantly beat the Zacks Consensus Estimate of $1.65.
Net sales for second-quarter 2016 improved to $14,874 million from $14,690 million in the year-earlier quarter. The increase in revenues was primarily attributable to improved performances of all segments, except the Otis segment. Revenues beat the Zacks Consensus Estimate of $14,634 million.
UTD TECHS CORP Price and Consensus
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 allows the company to remain profitable even during tough economic times, delivering consistent earnings and dividend growth.
In addition, United Technologies has a strong aftermarket business. The company not only manufactures and sells primary products such as elevators, aircraft engines and helicopters but also sells spare parts and offers related services to keep those primary products running. The company's aftermarket services business is relatively stable compared to new product delivery, and it helps offset the negative impact of downturns in the new products market.
United Technologies is also revamping its aerospace unit. It includes an overhaul of its organizational structure in the aerospace business along with some key changes in the leadership positions within it. United Technologies anticipates that the streamlined organizational set-up would enable it to better serve its customers. In addition, the company expects that the strategic moves will further ensure a successful entry and production ramp-up of its Geared Turbofan engines to thwart intense competition from other players in the market.
Based on the solid second-quarter results, United Technologies has raised its 2016 guidance. For 2016, the company expects adjusted earnings to be in the range of $6.45 to $6.60 per share (prior guidance: $6.30 to $6.60) on revenues of $57 billion to $58 billion (prior guidance: $56 billion to $58 billion). This represents improving business conditions and strong operating fundamentals of the company.
All these measures for a relatively healthy growth impetus for the near future probably raised investor confidence and drove the shares to a 52-week high.
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