United Technologies Corporation’s (UTX - Free Report) operating segment, Pratt & Whitney announced that it has been awarded a $2-billion contract for the 11th lot of F135 propulsion systems, which will support all three variants of the F-35 Lightning II aircraft.
The latest contract intends to reduce the propulsion system price, supporting the program affordability initiatives. Notably, this 11th low rate initial production (LRIP) contract will deal with 135 engines, apart from covering areas like program management, production support, engineering support, spare modules as well as spare parts.
Also, the contract is likely to reduce the unit recurring flyaway (URF) price for the 110 LRIP Lot 11 conventional takeoff and landing (CTOL) and carrier variant (CV) propulsion systems by 0.34% from the earlier negotiated LRIP Lot 10 URF. Furthermore, the URF price for the 25 LRIP Lot 11 short takeoff and vertical landing (STOVL) propulsion systems is expected to be reduced by 3.39% compared with the earlier negotiated LRIP Lot 10 URF.
United Technologies has a strong aftermarket business. In fact, its aftermarket services business is relatively stable compared to new product delivery. This, in turn, helps offset the negative impact of downturns in the new products market. For instance, in first-quarter 2018, the company’s aftermarket business witnessed increased sales across the segments with commercial and military up 18% and 13%, respectively.
Moreover, the company’s business mix and diversification allow it to remain profitable even during tough economic times, delivering persistent earnings and dividend growth. In the past six months, shares of this Zacks Rank #2 (Buy) company have gained 3.9% against the industry’s decline of 7.3%.
Furthermore, the company’s strong cash flow and disciplined capital deployment strategy enable it to invest in acquisitions and business development. In addition, its continuous investment in innovative products through higher engineering expenditure delivers value to its customers and secures orders that will drive top line growth in future.
This apart, the acquisition of Rockwell Collins will offer United Technologies a bigger clout in the industry and increase its bargaining power as it would emerge as one of the largest aircraft equipment manufacturers in the world.
Other Stocks to Consider
Some other top-ranked stocks from the same space include Honeywell International Inc. (HON - Free Report) , Danaher Corporation (DHR - Free Report) and Raven Industries, Inc. (RAVN - Free Report) . All these stocks carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Honeywell surpassed estimates in the trailing four quarters, with an average positive earnings surprise of 1.5%.
Danaher outpaced estimates in the preceding four quarters, with an average earnings surprise of 4.1%.
Raven exceeded estimates twice in the preceding four quarters, with an average positive earnings surprise of 9.8%.
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