United Technologies Corporation (NYSE:UTX) — This large-cap aerospace and industrial giant includes Pratt & Whitney jet engines, Otis elevators and Carrier air conditioners.
A 14% decline in sales in 2015 was caused by a slowdown in demand for aftermarket aerospace products, but sales are projected to increase by 2% this year and 3% in 2017. Currency weakness abroad also contributed to lower sales in foreign markets. Standard & Poor’s projects modest organic growth in 2016-2017, but once revenue growth accelerates, they see a generation of cash flow that should also benefit from reduced spending on new restructuring and lower pension output.
Also, with the new administration, a threat of sequestration on U.S. defense spending should be eliminated. S&P estimates earnings of $6.69 this year and $6.80 in 2017, and they forecast that long-term earnings improvements could be “sizable.” Thus in late October S&P decided to retain a four-star “buy” on the stock with a 12-month target price of $119.
Technically, UTX successfully tested its 200-day moving average, now at $102-plus, in October and November. In November the stock jumped to a high of $109.42, closely matching the closing high at $109.69 in August. This forms a clear barrier, which if exceeded could result in a run to about $120.
Note the decline in sellers and increase in buyers, and a positive MACD indicator — both usually precede a breakout. Thus, it appears that United Technologies should be bought at $108 with a trading target of $120 for a proposed gain of over 11%.
Investors seeking growth and income may consider UTX for long-term growth plus a yearly dividend of $2.64, for a 2.4% dividend yield.
