Does United Technologies Support All-Time Highs?

With shares of United Technologies (NYSE:UTX) trading around $94, 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:

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T = Trends for a Stock’s Movement

United Technologies provides technology products and services to the building systems and aerospace industries worldwide. The company designs, manufactures, sells, and installs a range of passenger and freight elevators, escalators, moving walkways as well as provides heating, ventilating, air conditioning, and refrigeration solutions. It also offers electronic security products, fire safety products, aircraft engines, and other aerospace products. United Technologies is heavily involved in providing world class products that span several growing industries.

T = Technicals on the Stock Chart are Strong

United Technologies has traded in an uptrend for most of the last decade. Currently, the stock is trading at all-time high and looks like it isn’t looking back just yet. 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 bullish price action in the near-term.

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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

18.96%

56%

60%

What does this mean? This means that investors or traders are buying a significant amount of call and put options contracts, as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

April Options

Flat

Average

May 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 a significant 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?

2012 Q4

2012 Q3

2012 Q2

2012 Q1

Earnings Growth (Y-O-Y)

55.48%

6.12%

1.38%

-67.57%

Revenue Growth (Y-O-Y)

14.41%

5.62%

-4.56%

-2.05%

Earnings Reaction

0.69%

-0.98%

0.44%

0.12%

United Technologies has seen increasing revenue and earnings over the last four quarters. From these figures, the markets have been satisfied with United Technologies’s last four earnings announcements.

P = Excellent Relative Performance Versus Peers and Sector

How has United Technologies stock done relative to its peers, Boeing (NYSE:BA), General Electric (NYSE:GE), Triumph Group (NYSE:TGI), and sector?

United Technologies

Boeing

General Electric

Triumph Group

Sector

Year-to-Date Return

11.46%

10.48%

8.39%

15.45%

4.94%

United Technologies has been a relative performance leader year-to-date.

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Conclusion

United Technologies is a leader in most of the areas that it participates in. The stock is currently trading at all-time high prices on earnings and revenue that have pleased investors. Relative to its peers and sector, the stock is one of the strongest in its sector. As global expansion is on the rise, look for United Technologies to OUTPERFORM.

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