Wells Fargo Positive On United Technologies Ahead Of Next Week's Guidance Call

Wells Fargo retained its Outperform rating on United Technologies Corporation UTX ahead of its December 14 guidance call, as it expects the company to return to predictable earnings growth.

The guidance call assumes significance as the event has led to short-term relative outperformance in United Tech shares 10 of the past 15 years.

Historically, the company provides a $0.20–$0.30 EPS guidance range. But, since United Tech already said "it is difficult to see earnings growth at the UTC level in 2017,” Wells Fargo believes investors are expecting 2016 EPS to be the high-end of the 2017 EPS guidance range — or $6.30–$6.60.

That said, analyst Sam Pearlstein commented that United Tech would benefit from upcycle in the aerospace industry, while being positive on the company’s efforts to cut costs and improve portfolio.

“We remain positive on UTX as we see a potential sum-of-the-parts valuation in the high-$120's — even factoring in the negative engine margin for Pratt & Whitney. Also, we think the $6.3 billion of cash held overseas could benefit UTX if corporate tax reform includes the ability to more efficiently repatriate cash,” Pearlstein wrote in a note.

The analyst has a valuation range of $115–$120, while shares were recently seen trading up 1.16 percent to $109.69.