Diversified industrial behemoth and Dow-30 component United Technologies (UTX Free United Technologies Stock Report), the largest maker of elevators and air conditioners in the world, with business lines that produce jet engines and helicopters as well, has announced fourth-quarter results that were a shade under our estimates. Still, the figures posted by the company were in line with consensus expectations, and the shares were bid up nominally in early morning trading.

Share net for the period came in at $1.04, one cent shy of our call, and well off from the 2011 showing. Year-over-year comparisons are of little use, however, as UTX's $16.5 billion acquisition of aerospace and defense contractor Goodrich Corp. resulted in dramatic portfolio changes over the course of 2012, which brought on sizable restructuring charges. For United Technologies, full-year earnings came in at $5.34 a share, again, down from the previous year's figure, but a success nonetheless in the majority's eyes, due to the fact that 2012 had already been marked as a transitional year for the company.

The top line for the December interim was up 10% from the same period last year, to $16.44 billion. We had aggressively targeted $16.58 billion, but the figure posted was within the consensus range. This metric was propelled by heightening demand for spare jet-engine parts. Simply put, air traffic is up and airliners can save a large amount of capital by repairing existing fleets instead of ordering new equipment. This backdrop plays into the strengths of UTX. The solid finish to the year in terms of revenues pushed the annual sales number above $57.7 billion. This fell short of the $58.2 billion registered in 2011, but that was to be expected, given the hefty amount of reconfiguration going on among UTX's business lines.

Speaking to that, 2012 was a year of change for United Technologies; the decision to bring in Goodrich was a costly one, and led to the exit of a handful of markets where the company had built up positions over the years. Notably, units that were involved in wind turbines, fuel cells, and industrial pumps have either already been divested or are in the process of being sold. Regardless, Goodrich is a juggernaut in the aerospace field and all these moves basically equate to UTX's near-term success being intertwined with the commercial airliner rebound. This is an enviable spot to be in given the growing middle class and the favorable data that has come in with regard to air traffic in the last few linked quarters. When all is said and done, we think management will be applauded for the Goodrich acquisition in time.

Looking ahead to 2013, management reiterated its previously announced guidance for revenues between $64.0 billion and $65.0 billion, which would translate into earnings in a range of $5.85 to $6.15 a share. We are of the belief that once the portfolio flux is fully completed, UTX will once again be able to flex its true earnings muscle. We expect this to occur by the middle of this year. That said, we are placing our revenue estimate for 2013 at $65.1 billion and we look for earnings of $6.10 a share, with the latter representing a 14% annual advance. Moreover, taking into account management's historically conservative bent, and factoring in our upbeat view of airline traffic trends, we believe handsome upside exists to our top- and bottom-line targets for 2013, barring any unforeseen events. In the same vein, cash-flow generation should rise steadily throughout the campaign and a large share-repurchase program should begin to kick in shortly. This plan may well be enhanced if pension expenses can be kept somewhat in check.

We think UTX shares are a quality addition to any portfolio. This blue chip's roster of accolades from a numerical perspective is lengthy; the company garners an A++ grade for Financial Strength, and the stock carries our Highest (1) rank for Safety, and near perfect scores for Growth Persistence and Earnings Predictability. Too, the equity offers ample long-term total return potential, and the dividend is secure and growing. In fact, UTX was among the few companies that did not cut its payout during the financial crisis of 2007-2009. Add to this the market's excitement over the potential performance of Goodrich under the UTX umbrella, and the future for the company, and the stock, appears to be bright.

About The Company:United Technologies operates in six business segments (excluding recently acquired Goodrich). Pratt & Whitney (revenues of $13.4 billion in 2011) makes and services aircraft engines. Otis ($12.4 billion) manufactures and services elevators. Carrier ($12.0 billion) makes heating, ventilating, and air-conditioning equipment. Sikorsky ($7.4 billion) makes helicopters. UTC F&S ($6.9 billion) provides security and fire protection services. Hamilton Sundstrand ($6.2 billion) produces aerospace and industrial products. The company also has a power division dealing in fuel cells. International operations account for nearly half of revenues.

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.