United Technologies (UTX) may not be a household name, but its individual products are things we interact with almost every day.
Do you ride elevators? UTX owns Otis Elevator, the maker of the world’s first safety elevator in 1853. Otis also makes escalators and other industrial people movers and equipment.
I’m guessing you have air conditioning, especially at this point in the summer. UTX owns the Carrier brand of home and commercial HVAC equipment.
Have a smoke alarm or fire extinguisher in your house? UTX owns Kiddie, one of the country’s largest home safety equipment companies.
And that’s just one of its divisions.
It also owns aircraft engine maker Pratt & Whitney. And within that group, it has key partnerships with major airplane makers as well as corporate partners. Its International Engines Alliance works with Airbus on its A320 engines. Its Engine Alliance is a 50/50 joint venture with General Electric (GE) that builds engines for the Airbus A380.
Its aerospace division alone employs 42,000 people worldwide with annual sales around $14 billion.
In 2012 UTX bought Goodrich and Hamilton Sunstrand to create this division, which has a very healthy position in the global defense and aerospace sectors. It works on everything from air management control systems and landing systems to satellites and UAVs.
And finally, there’s the Sikorsky helicopter division. Sikorsky was a pioneer in helicopters, building one of the first commercial models in 1939.
So it would seem that with such an impressive array of exposure, UTX would have the world on a string.
But just like GE, United Technologies has diversified in an era that has seen the financial markets collapse and a slow rebuilding process in its key U.S. and European markets. Growth is hard to come by in any of its sectors.
Commercial real estate isn’t moving, so its building and industrial systems division isn’t doing well. Consumers aren’t in the housing market like they were, so their home safety systems aren’t being upgraded or replaced. Defense contractors aren’t getting many orders these days as most Western governments are trying to get their economies moving without using the money to pump into new defense systems.
The only division that is a shining light of hope is Pratt & Whitney, since commercial aviation is growing and isn’t limited to Western economies.
And then there’s the recent announcement that UTX is looking to do something with its Sikorsky division.
UTX is either going to spin it off on its own, work out a joint venture with an unnamed partner or sell the unit to one of four interested buyers.
The helicopter business is pretty specialized and isn’t growing as fast as fixed-wing aircraft. And while it may dent earnings by 10 or 20 cents a share if its separated in one way or another, in the long run it will allow UTX to concentrate on its three most profitable divisions.
A decision is supposed to be made by the end of the third quarter.
Regardless, this is just a first step for a big company that has to do more than simply sell off a division. Until it decides what it’s going to do and the global economy gets a little more pep in its step, UTX remains a stock worth watching, but not worth buying right now.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
