News
UTC Aerospace Systems is a subsidiary of United Technologies, and what many people do not know is that UTC Aerospace secured a 5-year $70 million contract as the sole supplier on the CFG application for the V-22 program. Furthermore, according to a report by Defense Procurement News, UTC Aerospace Systems received a contract award and delivery orders from the Defense Logistics Agency, Philadelphia, for V-22 CFG spare parts to be supplies to the U.S. Air Force and the U.S. Navy and Marine Corps team. This upgrade program is the culmination of four years of cooperative effort between The Boeing Company (NYSE:BA), Textron Inc. (NYSE:TXT), NAVSUP Weapon Systems Support, NAVAIR, and UTC.
Boeing (NYSE:BA) has seen some significant setbacks recently, specifically with the launch of its 787 Dreamliner aircraft. The company extended the grounding of its fleet of 787 Dreamliner aircraft. This is now forcing airlines to rely on older planes to fill gaps in their routes. For example, LOT Polish Airlines is using Boeing 767s in place of the 787s. A January 16 decision by U.S. regulators to ground the jet will cause further delays, according to an announcement by Boeing. The cause of the grounding stemmed from an electrical flaws that caused a fire on a Japan Airlines jet.
Another key milestone for United Technologies is that the Sikorsky division of United Technologies is seeing an increase in sales of its Sikorsky Global Helicopters (S-92A) for use in the offshore oil and gas industry. Expect to see continued growth in this division as more and more companies prepare to spend billions on acquisition development of oil fields. Case in point:
Exxon Mobil Corporation (NYSE:XOM) and all the other oil exploration and production companies combined will spend over $650 billion looking for and producing new oil reserves. That is an increase of over $400 billion from 2005, where spending was only $250 billion. Based on the current growth trajectory, spending will exceed $1 trillion by 2016. That level of spending, in a single year, exceeds the gross national product of all but the 15 largest countries in the world. All of this establishment and development of new oil fields will require support services chief among them helicopters; specifically the multi-role/multi-purpose S-92A.
The Bottom Line
Stock prices just broke through its multi-year resistance of about $28 per share at the time of writing. With a $5 billion reduction of its debt load, a shedding of several non-performing business sections and the acquisition of two companies giving United Technologies a larger footprint in aviation, United Technologies is now set to soar.
Further adding to the case for going long, the Board of Directors announced a share repurchase program with the intent of buying back up to 60 million shares of its stock. Reduction of supply means an increase in demand which should result in an increase in stock price.
United Technologies has paid its shareholders a cash dividend every year since 1936. 2012 was no exception as the Board of Directors declared a dividend of 53.5 cents per share. The smart money is long on United Technologies.
The article Go Long On This Industrial Powerhouse originally appeared on Fool.com and is written by Maxwell Fisher.
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