United Technologies Corporation Acting As A Drag On The Dow
United Technologies Corporation (NYSE: UTX) shareholders have had to go into endurance mode. The stock appears to be going through an extended consolidation/corrective phase following the nice rally that took place from mid-2012 until the spring of 2014.
How are the fundamentals with United Technologies and how long will this correction last?
What The Bulls See
- Cheap valuation metrics: price to book of 2.87, price to sales of 1.51 and enterprise value that trumps its market capitalization.
- Ten percent net profit margins that translates to more than $4.3 billion in annual levered free cash flow.
- Current ratio of 1.22 and a debt-to-equity ratio of around 56 percent.
- A nice dividend yield of 2.2 percent.
What The Bears See
- Relatively bearish technicals that project United Technologies shares down to $103.79 and possibly even down to $97.60.
- Very modest revenue growth of only 4 percent expected for 2015.
- Expected earnings growth of only 8.26 percent, which makes the seemingly cheap P/E of 15 not quite as attractive as it was on the surface.
United Technologies sets up bearish in the short-term, according to technicians. Resistance comes in at $110.34 and support comes in at the August low of $103.79. If that level fails, which is possible given the increased volatility in the market recently, the next two levels of support come in at $99.79 and $97.60.
The bears may have the edge in the short-term with the possibility of the stock tumbling back down to at least $103.79 and possibly even down to the long-term uptrend line in the mid $90s if things get really bad. However, if support at any of the levels listed above or even the $93-$94 range (where the uptrend line comes into play), the stock could turn back to the upside and mount a nice rally.
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