Will United Technologies (UTX) Stock be Helped by Potential Sikorsky Sale?

NEW YORK (TheStreet) -- United Technologies (UTX) shares are up 0.53% to $119.70 in early market trading on Wednesday as the company looks for potential buyers for its helicopter manufacturing business Sikorsky, according to the Wall Street Journal.

The company had previously announced plans to spin off the Black Hawk helicopter manufacturer, but the Journal sources indicate that United Technologies has been courting offers from defense contractors Boeing (BA), Airbus Group  (AIR) and Lockheed Martin (LMT), among others.

Bids for Sikorsky are due later this month.

"As previously announced, UTC is exploring strategic alternatives for Sikorsky, which could include a sale or spinoff. We continue to expect the evaluation will be completed by midyear," a company spokesman told the Journal.

Sikorsky makes both commercial and military helicopters and is the U.S. Defense Department's largest helicopter supplier by value. The business reported $7.5 billion in sales last year with sources saying that the company could see bids in the $10 billion range.

TheStreet Ratings team rates UNITED TECHNOLOGIES CORP as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:

"We rate UNITED TECHNOLOGIES CORP (UTX) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, increase in net income, largely solid financial position with reasonable debt levels by most measures, notable return on equity and increase in stock price during the past year. We feel its strengths outweigh the fact that the company shows low profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • UNITED TECHNOLOGIES CORP has improved earnings per share by 19.7% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, UNITED TECHNOLOGIES CORP increased its bottom line by earning $6.82 versus $6.22 in the prior year. This year, the market expects an improvement in earnings ($7.00 versus $6.82).
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Aerospace & Defense industry average. The net income increased by 17.6% when compared to the same quarter one year prior, going from $1,213.00 million to $1,426.00 million.
  • The debt-to-equity ratio is somewhat low, currently at 0.77, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Despite the fact that UTX's debt-to-equity ratio is low, the quick ratio, which is currently 0.65, displays a potential problem in covering short-term cash needs.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Aerospace & Defense industry and the overall market on the basis of return on equity, UNITED TECHNOLOGIES CORP has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • UTX, with its decline in revenue, slightly underperformed the industry average of 3.4%. Since the same quarter one year prior, revenues slightly dropped by 1.4%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • You can view the full analysis from the report here: UTX Ratings Report

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