QUOTE AND NEWS
SeekingAlpha  Apr 3  Comment 
By Trefis: United Technologies' (UTX) helicopter production and services segment, Sikorsky, faced a very challenging last couple of years due to declining U.S. government defense spending. As the segment generates more than half of its sales...
SeekingAlpha  Apr 3  Comment 
By Dividends4Life: Linked here is a detailed quantitative analysis of United Technologies Corp. (UTX). Below are some highlights from the above linked analysis: Company Description: United Technologies Corp. is an aerospace-industrial...
Forbes  Apr 2  Comment 
The performance of America's manufacturing sector in the postwar era is often depicted as a chronicle of decline.  A sector that generated 25% of GDP in the 1950s now produces barely half that share, and the nation's industrial heartland...
Forbes  Apr 2  Comment 
In our view, this reorganization will enable Sikorsky to better serve its customers, particularly those from international military and commercial segments. In turn, this will likely aid growth in its results.
Jutia Group  Apr 1  Comment 
[PR Newswire] - LAS VEGAS, April 1, 2014 /PRNewswire/ -- Interlogix, a leader in security and life-safety solutions for residential and commercial enterprises, has acquired Ultra High Speed (UHS) from Australian company Hills Limited to broaden...
Forbes  Mar 27  Comment 
Looking ahead, Sikorsky anticipates its results to improve steadily driven by rising demand from international military helicopter markets and commercial helicopter markets, especially offshore oil rigs. The company currently anticipates its top...
Wall Street Journal  Mar 24  Comment 
Singapore-based Tiger Airways has ordered 37 Airbus Group A320neo jets with Pratt & Whitney engines to renew its fleet with more fuel-efficient aircraft.
SeekingAlpha  Mar 23  Comment 
By Investing Insight: United Technologies Corporation (UTX) provides high technology products and services to building systems and aerospace industries worldwide. Recent results of 2013: Net sales grew 8.5% to $62.6 billion compared to $57.7...
Benzinga  Mar 21  Comment 
Both United Technologies (NYSE: UTX) and Boeing (NYSE: BA) have been on massive runs since 2013, but Noah Poponak, analyst at Goldman Sachs, is beginning to favor the former. In a research note released Friday, Poponak said “it is currently...
StreetInsider.com  Mar 21  Comment 
UPGRADES Oppenheimer raises Emerson (NYSE: EMR) from Perform to Outperform with a price target of $77. Click Here for more color. CLSA raises BlackBerry (Nasdaq: BBRY) from Sell to Underperform, while raising its price target from $6 up to...




 

United Technologies (NYSE: UTX) is a conglomerate that makes products for a number of different industries. It makes most of its money, however, by selling helicopters, aircraft parts, elevators and escalators, and heating and air conditioning systems for buildings. The company earned $53 billion in revenue and $4.2 billion in net income in 2009.[1]

With around two-thirds of its revenues coming from abroad, UTX is a truly international company. UTX is especially focused on emerging markets. It the dominant player in the Chinese elevator market with an impressive three-quarters share of the market. China has about one third of the world's elevators, a number that is increasing and will help UTX's revenue grow.

About the remaining third off UTX's revenues come from the sale of aircraft, aircraft parts, and aircraft maintenance. As a result, the company is subject to the cyclical trends of the aerospace market. In general, increased military aircraft demand by the US government since 2001, as well as increased demand for commercial aircraft, has pushed revenues higher. Specifically, the company has benefited from the ongoing war in Iraq. The company signed a contract in 2007 to deliver 537 helicopters over the next five years.[2]

Although trends in recent years have been mostly positive, the company faces headwinds in the form of rising commodity prices. Its products use large amounts of metals such as titanium, steel and copper. Time table for the war in Iraq is also uncertain, and an early withdrawal would also adversely affect the company's prospects.

Company Overview

The company has 6 business segments:[3][4]

  • Carrier (21% of net sales) - heating and air conditioning systems
  • Pratt & Whitney (24% of net sales) - aircraft engines and space propulsion
  • Otis (22% of net sales) - elevators and escalators
  • UTC Fire & Security (10% of net sales) - fire and security systems for buildings
  • Hamilton Sundstrand (11% of net sales) - aerospace and industrial systems
  • Sikorsky (12% of net sales) - helicopters

Business Growth

FY 2009 (ended December 31, 2009)[1]

  • Net revenue decreased 11% to $53 billion.
  • Net income decreased 17% to $4.2 billion.

Trends and Forces

Increasing demand due to surge in offshore drilling

As oil prices have risen during the last decade, offshore drilling has become more popular. This trend has led to greater demand for helicopters, particularly the The Sikorsky S92 and S76 , to transport personnel to and from oil rigs.

Changes in Military Conflicts Abroad Affect Military Contracts for Sikorsky, Pratt & Whitney, and Hamilton Sundstrand

The war in Iraq and continued engagement in Afghanistan have created an increased demand for military aviation. Products such as the UH-60 Black Hawk have seen heavy use, and the US government contracts with United Technologies directly for its military products. The company's sales of military equipment have helped revenues since 2001 due to increased US military activity. However, if the war in Iraq changes course or ends, it might lead to a loss of revenue for United Technologies. As a military contractor, United Technologies also runs the risk of losing large contracts to competitors as the military upgrades and changes equipment. Sikorsky signed a contract with the US military in December 2007 for 537 helicopters to be delivered over the next five years.[5]

Large Amounts of International Business Expose the Company to Political and Currency Risks

Approximately two-thirds of United Technologies' revenue was from international sources, with about 30% of those coming from Europe and another 20% from the Asia Pacific region. Furthermore, business is conducted in a variety of global currencies, and changes in currency values are a risk to revenue. The devaluation of the US dollar versus other currencies makes doing business in other countries more expensive in US dollars, but also made revenue abroad worth more in US dollars. Because UTX makes the majority of its revenues outside the US, a decrease in the value of the dollar raises revenues.

Fluctuations in Housing and Commercial Real Estate Markets Affect New Construction Revenues for Otis, Carrier, and UTC Fire & Security

With business units Otis, Carrier, and UTC Fire & Security relying on construction of new buildings for revenues, changes in the commerical and residential real estate markets can have a significant impact on revenues. The downturn in the real estate market has presented a risk for United Technologies, but the company has continued to increase revenues through first quarter 2008 despite the unfavorable market.[6]. About 25% of the company's revenue comes from residential housing.

2010 Layoff Announcements

In July 2010, UTX announced it would be cutting 2,100 employees by the end of 2011. The announcement was made in concert with an increase in the firm’s profit projections, and is interpreted by many as an effort to control inefficiencies, rather than a move of financial necessity.

Commodity Price Fluctuations drive down Profit Margins

As a manufacturing company, raw materials are a primary expense in creating salable products. Increasing commodity prices, especially for steel, copper, aluminum, titanium and nickel have limited profit margins. The company deals with this issue through conservation, scrap reclamation, consolidating purchases, and limiting the number of different suppliers.

Exposure to Emerging Markets Drives UTX's Growth

United Technologies is invested in emerging markets, such as China and India, which are growing much faster than U.S. domestic markets. The Chinese elevator market, which Otis controls a 75% of, is growing at a rate of 15-20% per year. In addition to new construction, emerging markets have had increased demand for commercial aircraft.

Competition

With business units in a number of different fields, United Technologies has numerous competitors, though most competitors are specialized to only one business field. Notable competitors include Rolls-Royce and GE Aviation, which compete with Pratt & Whitney in producing airplane engines; SPX Corporation, which competes with UTX in the HVAC market; and Honeywell, a large conglomerate that competes with United Technologies in both the aerospace and building supply markets.

References

  1. 1.0 1.1 UTX 2009 10-K Exhibit 13 pg. 1
  2. United Technologies gets $1.5 B US Army contract, Reuters
  3. UTX 2009 10-K Exhibit 13 "Segment Review" pg. 8
  4. UTX 2009 10-K "Description of Business Segments" pg. 3-7
  5. United Technologies gets $1.5B US Army contract, Reuters
  6. United Technologies Posts Solid Quarter Despite Housing Weakness, Seeking Alpha
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