Citigroup initiated coverage on United Technologies Corporation UTX with a Buy rating and a $139 price target. According to a report published on Friday, the company is poised for attractive sales and earnings growth as significant organic and inorganic investments start to pay off.
Two other major growth drivers are “the troughing of the military end market and the expanded deployment of the company’s ACE operating system into its supply base.”
In the analysts’ view, these factors should support a 14 percent increase in free cash flow over the next several years (“vs. the approximately 2.5 percent now priced into the stock”), as well as greater shareholder cash returns and additional accretive M&A activity.
As the report explains, “UTX is levered to urbanization trends that drive demand for the company’s building products (elevators, HVAC, fire, security, etc.). It also has a leading aerospace portfolio offering new products for the next generation of aircraft that derive most of their benefits from new systems & engines.”
Some Other Catalysts Mentioned
Next week, on January 27, United Technologies is scheduled report its fourth-quarter earnings, which analysts expect to add color to the 2015 guidance provided last December.
The U.S. defense budged will be submitted on February 2, and “suggests spending trends.”
The analysts also advise investors to keep an eye on the March investor day and helicopter aero show (the June Paris Air Show) and GTF’s entry into service in the second half of the year.
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