On Sep 27, Zacks Investment Research downgraded United Technologies Corporation (UTX - Analyst Report) to a Zacks Rank #4 (Sell).
Headquartered in Hartford, CT, United Technologies provides high-end technology products and services to the building systems and aerospace industries worldwide. The operations of the company are primarily classified into two principal businesses: Commercial and Aerospace. Under its commercial business, the company has Otis and the UTC Climate, Controls & Security division, which is a combination of the former Carrier and UTC Fire & Security divisions. The aerospace business consists of the UTC Propulsion & Aerospace Systems, which includes UTC Aerospace Systems and Pratt & Whitney divisions.
United Technologies designs, manufactures and services products that incorporate advanced technologies. The introduction of new products and technologies involves risks, and the degree or timing of benefits may not be correctly anticipated. At present, United Technologies seems to be facing challenges in most fronts, and it would be prudent for investors to remain on the sidelines for the time being.
With over 8,000 employees, United Technologies has a considerable presence in the U.K, registering approximately $2 billion in revenues from the region in 2015 out of the overall tally of $56.1 billion. Consequently, the company is susceptible to high operating risks following the Brexit referendum. Fluctuations in foreign currency exchange rates also affect the company’s net investment in foreign subsidiaries and may cause instability in cash flows related to foreign denominated transactions. These undermine its long-term growth to some extent.
The financial performance of the company depends on the conditions of the construction and aerospace industries. The company is also heavily dependent on the U.S. government’s budgetary allocation for defense. A reduction in capital spending for the commercial aviation or defense industries could have a significant effect on demand for its products, which could in turn have an adverse impact on its financial performance.
However, the company generates strong free cash flow. The cash flow allows management to invest in product innovations, acquisitions and business development. The company continues to invest in innovative products delivering value to its customers and securing orders that will drive top-line growth in future. Also the company has won many contracts in China in the first half of 2016. These contracts will help the company augment its bottom-line.
Some better ranked stocks include Acacia Research Corporation (ACTG - Snapshot Report) , Performant Financial Corporation (PFMT - Snapshot Report) and Berry Plastics Group, Inc. (BERY - Snapshot Report) .
Acacia Research currently carries a Zacks Rank# 2 (Buy). Over the past 30 days, its Zacks Consensus Estimate has remained unchanged. Its share price has increased 48.48% year to date.
Performant Financial witnessed an upward earnings estimate revision of approximately 50% over the past 60 days. Its share price has gained 45.25% year to date. It currently holds a Zacks Rank# 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Berry Plastics also carries a Zacks Rank# 2. Over the past 60 days, the Zacks Consensus Estimate has seen upward earnings estimate revision of approximately 12.5%. Its share price has increased 25.76% year to date.
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