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United Technologies, (UTX Free United Technologies Stock Report) an industrial conglomerate that makes everything from jet engines to elevators, has announced fourth-quarter financials that topped expectations in terms of both revenues and earnings by a wide margin. The company also struck an upbeat tone with regard to its 2019 guidance. On the heels of these positive announcements, UTX stock was up by as much as 7% in early morning trading today.

Revenues for the three-month period clocked in at $18.04 billion versus the year-earlier figure of $15.68 billion and our call, which was on par with the consensus, of $16.84 billion. The Aerospace business carried the growth torch, as this was the first quarterly report with the $30 billion Rockwell Collins purchase fully factored in. Breaking it down further, commercial aftermarket sales at the Pratt & Whitney division rose 11% year over year, equipment orders at Carrier were 3% higher, and Otis' elevator orders were flat, with a slowdown in China being the perceived thorn in the company's side for this segment.

Adjusted share net for the December quarter came in at $1.95, a full $0.40 above the consensus expectation, and a handsome improvement from the $1.60 posted in the fourth quarter of 2017. The loftier sales level contributed to a good portion of the jump, while synergy savings was another factor in the sizable beat. The benefit of a reduced tax rate certainly cannot be ignored, as well.

Not much new news was provided on the recently announced breakup of the conglomerate. Some in the investment world were likely expecting fresh details, but we are not surprised given the fact that the split is not planned to begin until 2020. What we do know is that United Technologies will be splintering into three pieces. The Otis elevator arm is one, the Carrier building systems branch is two, and the third piece is an aerospace concern comprised of the Pratt & Whitney engine business and the aforementioned Rockwell Collins purchase. This coupling will be the backbone of the new UTX going forward. Originally, we were not enamored with the decision to break up the company, but the investment world has truly soured on the conglomerate setup, a sentiment that has grown stronger in the wake of General Electric's high-profile problems. Still, this stock has not truly enjoyed the run-up associated with good news of this magnitude, as the elongated time frame until the separation is completed dampened much of the initial enthusiasm.

For 2019, management sounded bullish in their commentary. Guidance brackets were provided for both the top and bottom lines. In terms of revenues, the expectation has been set at between $75.5 billion and $77.0 billion. For earnings, a spread of $7.80 to $8.00 a share has been established. When dealing with UTX, we use history as a guide. In guidance instances, management has been prone to set the bar low and then hurdle it. With that in mind, we are placing our 2019 calls at the high end of each provided range. Thus, we envision sales of $77.0 billion translating to share net of $8.00. Subscribers should note that upside exists to these figures, and we anticipate having to ratchet them up a bit, perhaps as early as at the time of the first-quarter financial release.

But the question remains, is this blue chip a worthwhile investment? At recent price points, we think the answer is yes. This high-quality selection (Safety: 1) is a good choice for total return out to 2021-2023. Over that span, the combination of decent capital appreciation potential and a yield that exceeds the Value Line median combine to make UTX a solid play on a long-term risk-adjusted basis.

About The Company: United Technologies operates in four business segments: Pratt & Whitney makes and services aircraft engines; Otis manufactures and services elevators; UTC Climate, Controls & Security makes heating, ventilating, and air-conditioning equipment; and UTC Aerospace Systems produces aerospace and industrial products.

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