United Technologies Slips to Hold - Analyst Blog

On Mar 29, Zacks Investment Research marginally downgraded United Technologies Corp UTX to a Zacks Rank #3 (Hold) from a Zacks Rank #2 (Buy) Primarily based on downward estimate revisions.

Despite the downtrend, the company still has the potential to drive the stock up. The stock is currently trading at a forward P/E of 16.8x with long-term growth expectations of 11.1%.

Why the downgrade?

United Technologies has witnessed downward estimate revisions for the current quarter with estimates going down in the past 30 days. The Zacks Consensus Estimate for first quarter 2014 has declined from $1.38 in the last 30 days to $1.27.

Some industry experts expect first quarter 2014 earnings to be $1.25 per share, while the Zacks Consensus Estimate for the upcoming quarter is pegged at $1.27 per share.  Restructuring costs are likely to weigh on the first quarter results. The results are likely to be affected by one-time cuts of 7 cents this year. United Technology, however, recently reaffirmed its previous 2014 forecast of earnings in a range of $6.55 to $6.85 per share on sales of about $64 billion.

The financial performance of the company largely depends on the conditions of the construction and aerospace industries. The company is also highly 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.

United Technologies currently has a Zacks Rank #3 (Hold). Other stocks that look promising and are worth a look now include Federal Signal Corp FSS, having a Zacks Rank #1 (Strong Buy), and 3M Company  MMM and CLARCOR Inc. CLC, both having a Zacks Rank #2 (Buy).