What Will Drive United Tech’s Near Term Growth?

by Trefis Team
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United Technologies (NYSE: UTX) has had a great year so far. While things at Otis suffered slightly on the slowdown in China, all other segments managed to produce positive organic growth. Further, the company believes that the momentum gained thus far is expected to carry through the remainder of the year, as well. In this respect, the management decided to revise full year guidance upward for the second time. We have created an interactive dashboard What Is The Outlook For UTX on the company’s expected performance in 2019. You can adjust the revenue and margin drivers to see the impact on the company’s overall revenues and earnings.

As mentioned above, all segments have been performing well in the year. In particular, Pratt & Whitney seems to have finally gotten things on track. After over a year of program delays, the GTF engine, Pratt’s main revenue driver at the moment, is now being produced at an accelerated capacity. With over 9,000 engines in backlog, we expect the program to generate significant business for the company over the long term.

That said, China continues to hurt performance at Otis on sustained pricing pressure and an adverse mix. While this is a problem, the company has managed to mitigate some of the losses by taking in higher orders from North America and Europe. Additionally, as the global economy gains some momentum, we can expect to see business at the segment improve over time.

Further, the company is expected to help both its top and bottom lines by acquiring Rockwell Collins. In general, the management and investors alike, are very excited about the integration. Collins Aviation (the name of the combined company), will give the conglomerate the chance to differentiate its products, by adding more intelligent services to its portfolio. This, in turn, will ensure an enhanced customer value, which is expected to help the company gain more market share over the long-term. Additionally, the deal is also expected to deliver at least $500 million in net cost synergies.

Overall, we believe the company is treading forward on the right path. With good growth initiatives and strategic acquisitions, United Tech could be leading itself to a strong 2019.

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