United Technologies Corp. Receives a Hold from Credit Suisse

By George MacDonald

Credit Suisse analyst Julian Mitchell reiterated a Hold rating on United Technologies Corp. (NYSE: UTX) yesterday and set a price target of $109. The company’s shares opened today at $101.42.

Mitchell wrote, “We continue to think consensus EPS for overall UTX is ~$0.30 too high for 2018 (see our recent deep-dive report Cutting estimates on Otis), and ongoing downwards pressure will likely mean that the valuation multiple, while relatively low, struggles to expand. We therefore retain our Neutral rating. 2017 commentary suggests gross margin pressure will persist in China… One of our main concerns on Otis is the China price war intensification evident YTD among OEMs, and the fact that this has not yet manifested in the Otis P&L. As this year’s orders (better volume market share for Otis, but worse pricing) start to be billed as sales, we think gross margins will struggle in 2017. Kone’s comments suggest that next year will see some moderation in the OE unit order declines in China (after a 5-10% decline in 2016), but declines are still likely (while property trends have shown stabilization this year, developers remain very cautious), and there may be no relief in pricing, with ‘competition to remain intense’. Hence, we could see this gross margin pressure persist for Otis through 2018.”

According to TipRanks.com, Mitchell is a 5-star analyst with an average return of 8.1% and a 76.3% success rate. Mitchell covers the Industrial Goods sector, focusing on stocks such as Emerson Electric Company, Rockwell Automation Inc, and Lennox International.

United Technologies Corp. has an analyst consensus of Moderate Buy, with a price target consensus of $113.

The company has a one year high of $109.83 and a one year low of $83.39. Currently, United Technologies Corp. has an average volume of 3.26M.

Based on the recent corporate insider activity of 19 insiders, corporate insider sentiment is negative on the stock. Last month, DELPECH PHILIPPE, a the President of UTX sold 40,800 shares for a total of $4,394,976.

United Technologies Corp. engages in the provision of products and services to the building systems and aerospace industries worldwide. It operates through five business segments: Otis, UTC Climate, Controls & Security, Pratt & Whitney, UTC Aerospace Systems, and Sikorsky. The Otis segment designs, manufactures and markets elevators, escalators, moving walkways and service. The UTC Climate, Controls & Security segment provides heating, ventilating, air conditioning and refrigeration solutions, including controls for residential, commercial, industrial and transportation applications, security and fire safety products and services. The Pratt & Whitney segment provides aircraft engines for the commercial, military, business jet and general aviation markets. The UTC Aerospace Systems segment provides aerospace products and aftermarket services for diversified industries worldwide. Its aerospace products include electric power generation, management and distribution systems, flight control systems, engine control systems, intelligence, surveillance and reconnaissance systems, engine components, environmental control systems, fire protection and detection systems, propeller systems, aircraft nacelles, and interior, actuation, landing and electronic systems. The Sikorsky segment manufactures military and commercial helicopters and also provides aftermarket helicopter and aircraft parts and services. This segment’s aftermarket business includes spare parts sales, mission equipment, overhaul and repair services, maintenance contracts and logistics support programs for helicopters and other aircraft. The company was founded in 1934 and is headquartered in Farmington, CT.