One of the Dow 30 components, industrial product and aerospace system manufacturer United Technologies Corporation (NYSE:UTX), has the wind at its back thanks to its enhanced foothold in the commercial aircraft market. In July, it will be a year since the buyout of Goodrich Corp., a supplier that generates more than $8 billion in annual sales. Plus, its legacy Pratt & Whitney unit is becoming a greater contributor to the company’s bottom line. In all, global increases in air travel and fleet expansion domestically, as well as abroad, ought to drive ongoing profit gains for the company this year.
The takeover and integration of Goodrich has ignited earnings gains this year. Aerospace systems division profits jumped more than 150% in the first quarter, to $509 million. The buyout has substantially bolstered United Technologies Corporation (NYSE:UTX)’s presence on each individual aircraft by two times its previous amount. Plus, management is banking on about $500 million in annual revenue and cost synergies from Goodrich by 2016. Given continued industry growth, it should remain a boon to the bottom line.
Simultaneously, United Technologies Corporation (NYSE:UTX)’ Pratt division, a manufacturer of spare aircraft engines, is seeing heightened demand globally, as legacy airlines replace older fleet with more-efficient models and those in emerging markets build their asset bases. Specifically, by region, Asia, Europe, the Middle East, Latin America and Africa are all advancing in terms of air miles flown and thus seating capacity. Notably, United Technologies’s management envisions a revitalization of the aircraft industry, with sales volumes returning to levels not experienced since the 1980s.
Fellow engine supplier and diversified industrial/aerospace giant General Electric Company (NYSE:GE) has the same ambition of producing a larger proportion of each aircraft. In fact, it recently noted that it will have roughly 20% more content on each plane within the 2015-2020 timeframe than ever before. Although aviation comprises a much smaller proportion of GE’s total income than at United Technologies Corporation (NYSE:UTX), it is a significant piece of its business. Along with GE’s other currently growing units, including Healthcare and Transportation, its Aviation business should assist long-term profit expansion, making the shares a good selection for buy and hold investors.
United Technologies Corporation (NYSE:UTX) is not resting on its laurels as far as its market share goes; it is consistently developing and improving its product lines. On the commercial side, Airbus has agreed to include its efficient and low-noise PurePower PW1000G engine on 2015 A320 aircraft. Similarly, that offering has been chosen by regional jet makers Bombardier, Mitsubishi, and Embraer SA (NYSE:ERJ) for upcoming product launches.
