Why United Technologies Had A Bad Wednesday

• Shares of United Technologies Corporation UTX were trading down more than 2.2 percent on Wednesday afternoon.
• The decline seems to have been triggered by two events: the announcement that its Pratt & Whitney unit recorded a pre-tax charge of roughly $870 million in the fourth quarter of 2015, and a downgrade issued by Sterne Agee CRT.

In a report issued Wednesday, Sterne Agee CRT analysts Peter Arment, Asher Carey and Josh W. Sullivan downgraded shares of United Technologies from Buy to Neutral and maintained a $100 price target based on ~14x their 2017 estimates.

Related Link: Argus: Honeywell Has Upside, Will Make More Strategic Acquisitions

The analysts declared being "more comfortable moving to the sidelines" as they see the stock stuck in a tight trading range ($88-$105) over the next nine months "given limited operating income growth offset by aggressive buybacks."

It's true that CEO Greg Hayes continues to reorganize the company's portfolio by realigning costs with a major restructuring program announced in December. But, while buybacks support the downside in United Technology’s stock, the upside is also limited by the fact that the only one of the company’s four segments has operating income growth in 2016.

Arment, Carey and Sullivan think that Honeywell International Inc. HON offers a better risk/reward profile for investors over the next 12 months.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.