Buy: United Technologies
Thanks to the Pentagon’s decision to bring back most of its civilian employees sent home by the partial government shutdown, United Technologies (UTX) cancelled plans to furlough 4,000 employees from its Sikorsky Aircraft and Pratt & Whitney units who work on the Black Hawk helicopter program. That’s a strong signal that United Technologies plans to stay primed for business.
After second-quarter earnings, UTX raised the low end of its full-year guidance despite headwinds from the federal government’s sequestration — thanks to a massive restructuring effort that has made the company leaner and meaner. United Technologies has the benefit of a strong position in defense/aerospace, as well as diversification in the high-growth commercial aircraft sector — a market UTX further optimized by acquiring B.F. Goodrich last year.
Shareholders, however, might be happier about the company’s 10% increase in its fourth-quarter dividend — a move that brings the current yield near 2.3%.
The company’s consistently strong cash generation — combined with analyst estimates that the stock has a potential upside of about 13% for the next year — increases the attraction, as does the strong management team ably led by CEO Louis Chenevert.