Skip to main content
Message Font: Serif | Sans-Serif
No. of Recommendations: 0
United Technologies Offers Wide Moat, Steady Growth

Linked here is a detailed quantitative analysis of United Technologies Corp. (UTX). Below are some highlights from the above linked analysis:


Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description:

1. Avg. High Yield Price
2. 20-Year DCF Price
3. Avg. P/E Price
4. Graham Number

UTX is trading at a discount to 1.) and 2.) above. Since UTX’s tangible book value is not meaningful, a Graham number cannot be calculated. The stock is trading at a slight discount to its calculated fair value of $69.44. UTX earned a Star in this section since it is trading at a fair value.


Conclusion: UTX earned one Star in the Fair Value section, earned three Stars in the Dividend Analytical Data section and earned one Star in the Dividend Income vs. MMA section for a total of five Stars. This quantitatively ranks UTX as a 5 Star-Strong Buy.

Using my D4L-PreScreen.xls model, I determined the share price would need to increase to $83.47 before UTX’s NPV MMA Differential decreased to the $1,800 minimum that I look for in a stock with 17 years of consecutive dividend increases. At that price the stock would yield 1.84%.

Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $1,800 NPV MMA Differential, the calculated rate is 13.3%. This dividend growth rate is slightly less than the 15.0% used in this analysis, thus providing only a slim margin of safety. UTX has a risk rating of 1.25 which classifies it as a low risk stock.

UTX’s product leadership has produced a wide-moat. Over the last ten years, the company has shown steady growth in both earnings and dividends. UTX has a strong balance sheet with 34% debt to total capital and an excellent free cash flow payout of 29%. Large backlogs at Airbus and Boeing (BA), moderate demand for global infrastructure, strong demand for military helicopters and sustained productivity improvements will benefit UTX in the near-term. UTX is trading near my buy price of $69.44. However, I will limit purchases based on its low dividend yield. For additional information, including the stock’s dividend history, please refer to its data page.
Print the post  


What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.