Market Overview

United Technologies Corporation Acting As A Drag On The Dow

United Technologies Corporation Acting As A Drag On The Dow
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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.

Related Link: Cisco Systems, Inc. Shares Continue To Lag The Market

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.

Technical Take

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.

Stock chart: 
Stock chart

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