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A Technical Look At Why United Technologies Stock Is On The Bull's Radar

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A Technical Look At Why United Technologies Stock Is On The Bull's Radar
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United Technologies Corporation (NYSE: UTX) shares have rebounded 13 percent since the October lows, right in the face of a rising U.S. dollar (which in theory could weigh on profits with currency translation).

Does the company have the fundamental goods to justify the stock continuing to appreciate from current levels? Do the technicals tell a bullish or bearish story for United Technologies?

What The Bulls See

  • An attractive 2.1 percent dividend yield with only a 35 percent payout ratio, indicating they can easily raise the dividend even more.
  • Reasonable valuation metrics: a price-to-book ratio of 2.94, a price-to-sales ratio of 1.54 and an enterprise value of $115 billion compared to a market capitalization of only $99 billion.
  • 9.57 percent net profit margins that spin-off approximately $5.44 billion in levered free cash flow annually.
  • Relatively healthy balance sheet metrics: a 56.29 percent debt-to-equity ratio and a current ratio of 1.23.

Related Link: Qualcomm Bulls Trying To Do Some Repair Work

What The Bears See

  • A PE of 15, which seems a bit high when considering the 2015 estimates for revenue and EPS growth of 3.5 percent and 10.6 percent, respectively.

The Technical Take

Technicians note that United Technologies shares seem to be in the midst of a short-term downside correction after the impressive run up off of the October lows. Support for this correction begins at $108.31 and is backed up by more at $106.21, $104.51 and $102.80. Once a floor is found during this short-term correction, a run back up above the November 25 high at $112.26 is expected. That run could take the stock back up toward the June high at just above 120.

Fundamentally, the company appears to be rock solid, with only a modestly high PE as a strike against it.

Stock chart: 
Stock chart

Posted-In: Long Ideas Dividends Technicals Movers Trading Ideas Best of Benzinga

 

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