UTC Climate, Controls & Security — a unit of United Technologies Corporation (UTX - Free Report) — recently announced that it has completed the buyout of S2 Security. Notably, S2 Security will be combined with Lenel, part of UTC Climate, Controls & Security, to form LenelS2. However, the terms of the deal were kept under wraps.
Separately, the U.S. Department of Justice recently gave green signal for the sale of Rockwell Collins, Inc. (COL - Free Report) to United Technologies on the condition of the divestment of Rockwell’s two business operations.
Notably, UTC Climate Control and Security is one of the leading manufacturers and distributors of HVAC and refrigeration systems for residential, commercial, industrial and transportation applications. Being part of UTC Climate Control and Security, Lenel provides software and integrated systems for commercial and government security markets.
Based in Framingham, MA, S2 Security is the manufacturer of IP-based physical security and video management systems for healthcare, education and manufacturing companies in the United States and abroad.
United Technologies believes that the buyout of S2 Security will boost its security portfolio as well as enhance service capabilities and offerings to its customers. As a matter of fact, the complementary product portfolios and customer bases of both the companies will enable LenelS2 to offer scalable and innovative customer solutions in the access control and security management systems industry.
Approval for the Sale of Rockwell Collins
The U.S. Department of Justice recently gave approval for the sale of Rockwell Collins to United Technologies. Notably, the deal was approved on the condition that United Technologies is required to divest Rockwell's pneumatic ice protection systems business as well as its trimmable horizontal stabilizer actuator business. The EU Commission approved the deal in May. However, the merger still needs regulatory approval from China.
Existing Business Scenario
United Technologies is experiencing strength in commercial aerospace aftermarket business and innovation investments. Strength in Otis, Climate Control and Security, Pratt & Whitney, as well as the aerospace businesses will likely drive the company’s top-line growth in the quarters ahead.
Moreover, the company continues to invest in innovative products through higher engineering spend, delivering value to its customers and securing orders that will drive revenue growth in future. In the past three months, shares of the Zacks Rank #3 (Hold) company have yielded 13.3% return, outperforming the industry’s growth of 7.0%.
However, material cost inflation is currently augmenting the company’s costs. This, along with additional tariff imposition, might continue to escalate its expenses in the near term.
Stocks to Consider
A couple of better-ranked stocks in the same space are Federal Signal Corporation (FSS - Free Report) and Danaher Corporation (DHR - Free Report) . While Federal Signal sports a Zacks Rank #1 (Strong Buy), Danaher carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Federal Signal surpassed estimates in each of the trailing four quarters, with an average positive earnings surprise of 22.48%.
Danaher outpaced estimates in each of the preceding four quarters, with an average earnings surprise of 4.95%.
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