Can United Technologies Continue This Bull Run?

With shares of United Technologies (NYSE:UTX) trading around $91, 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 high 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. Countries and cities in developing countries are seeing explosive growth and will continue to do so in coming years. United Technologies provides the products and services that are incorporated into these cities and countries. Also, aerospace infrastructure is seeing a constant revamp as consumers and businesses demand lower prices and better service. With these two trends in full swing, look for United Technologies to continue to see growing profits.

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T = Technicals on the Stock Chart are Strong

United Technologies stock has seen a consistent uptrend of higher highs and higher lows over the last several years. The stock is currently trading near all-time highs and shows no imminent signs of slowing. 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 around its rising key averages which signal neutral to bullish price action in the near-term.

UTX

(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

18.2%

20%

18%

What does this mean? This means that investors or traders are buying a small 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

Average

Average

June Options

Average

Average

As of today, there is an average demand from call and put buyers or sellers, neutral over the next two months. To summarize, investors are buying a small amount of call and put option contracts and are leaning neutral 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)

15.90%

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 been pleased with United Technologies’s recent earnings announcements.

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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

11.72%

21.95%

6.05%

16.23%

10.02%

United Technologies has been an average performer, year-to-date.

Conclusion

United Technologies provides aerospace and building systems products and services to a multitude of businesses around the world. The stock has seen a beautiful uptrend over the last several years and is now trading in all-time high territory. Earnings and revenue figures have been in line with investor expectations. Relative to its peers and sector, United Technologies has been an average year-to-date performer. Look for United Technologies to OUTPERFORM.

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