With shares of United Technologies (NYSE:UTX) trading around $93.49, is UTX an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
T = Trends for a Stock’s Movement
United Technologies provides technology products and services to the building systems and aerospace industries worldwide. The Company operates in six segments: Otis, Carrier, UTC Fire & Security, Pratt & Whitney, Hamilton Sundstrand and Sikorsky. Air travel and defense has been rising in importance over the last decade or so. Governments around the world consistently demand improved aerial technology. Companies and consumers also demand improved efficiency and reduced prices. As air gains market share as a prepared method of transportation, look for companies like United Technologies to see rising profits well into the future.
T = Technicals on the Stock Chart are Strong
United Technologies stock has seen a consistent uptrend over the last several years. The stock is now consolidating at all-time high prices so it will more than likely continue higher. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, United Technologies is trading above its rising key averages which signal neutral to bullish price action in the near-term.
(Source: Thinkorswim)
Taking a look at the implied volatility (red) and implied volatility skew levels of United Technologies options may help determine if investors are bullish, neutral, or bearish.
| Implied Volatility (IV) | 30-Day IV Percentile | 90-Day IV Percentile | |
| United Technologies Options | 16.64% | 0% | 0% |
What does this mean? This means that investors or traders are buying an insignificant amount of call and put options contracts, as compared to the last 30 and 90 trading days.
| Put IV Skew | Call IV Skew | |
| May Options | Flat | Average |
| June Options | Flat | Average |
As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying an insignificant amount of call and put option contracts and are leaning neutral to bullish over the next two months.
On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.
E = Earnings Are Increasing Quarter-Over-Quarter
Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on United Technologies’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for United Technologies look like and more importantly, how did the markets like these numbers?
| 2013 Q1 | 2012 Q4 | 2012 Q3 | 2012 Q2 | |
| Earnings Growth (Y-O-Y) | 286.1% | 53.44% | 6.12% | 1.38% |
| Revenue Growth (Y-O-Y) | 15.97% | 14.37% | 5.67% | -4.58% |
| Earnings Reaction | -0.79% | 0.68% | -0.97% | 0.44% |
United Technologies has seen increasing earnings and revenue figures over the last four quarters. From these figures, the markets have expected a little more from United Technologies’s recent earnings announcements.
P = Average Relative Performance Versus Peers and Sector
How has United Technologies stock done relative to its peers, Boeing (NYSE:BA), General Electric (NYSE:GE), Honeywell (NYSE:HON), and sector?
| United Technologies | Boeing | General Electric | Honeywell | Sector | |
| Year-to-Date Return | 14.01% | 25% | 7.62% | 19.88% | 12.39% |
United Technologies has been an average performer, year-to-date.
Conclusion
United Technologies provides valuable aerospace technology and services to a multitude of companies participating in various industries worldwide. The stock has been a strong performer over the last several years and is now consolidating near all-time high prices. Earnings and revenue figures have been growing but investors have expected a little more from the company. Relative to its strong peers and sector, United Technologies has been an average year-to-date performer. Look for United Technologies to OUTPERFORM.
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