After hitting a one-year high of $82.50 in October, the stock hit a one-year low of $58.87 on Tuesday. UTX opened this morning at $64.50. So far today the stock has hit a low of $62.58 and a high of $65.31. As of 12:45, UTX is trading at $63.82, up 2.71 (4.4%). The chart for UTX looks bearish and steady, while S&P gives the stock a bullish 4 Stars (out of 5) buy rating.
For a bullish hedged play on this stock, I would consider a November bull-put credit spread below the $50 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 8.7% return in just 4 months as long as UTX is above $50 at November expiration. UTX would have to fall by more than 23% before we would start to lose money. Learn more about this type of trade here.
UTX hasn't been below $58 at all in the past year and has shown support around $59 recently. This trade could be risky if the US military efforts in the Middle East slow down in the next few months, but even if that happens, it is tough to imagine military spending really decreasing by a significant amount.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in UTX.
As the second quarter earnings crunch begins in earnest this week, the bear market has investors jittery and prognosticators spinning out dire warnings. In the wake of mixed results from Alcoa (NYSE: AA) and General Electric (NYSE: GE) kicking things off last week, here's a look at what Wall Street is expecting from many of the companies scheduled to report this coming week.
Analysts surveyed by Thomson Financial are expecting the following companies to report a rise in earnings when compared to the same period of the previous year.
Nucor Corp. (NYSE: NUE): $1.80 EPS (36.6%) on sales of $6.4 billion (+53.0%)
Google Inc. (NASDAQ: GOOG): $4.74 EPS (24.9%) on sales of $3.9 billion (+41.6%)
Nokia Corp. (NYSE: NOK): 56 cents EPS (23.2%) on sales of $19.9 billion (+17.8%)
CSX Corp. (NYSE: CSX): 90 cents EPS (21.1%) on sales of $2.9 billion (+12.8%)
Altera Corp. (NASDAQ: ALTR): 27 cents EPS (18.5%) on sales of $346.7 million (+8.4%)
IBM (NYSE: IBM): $1.82 EPS (+17.6%) on sales of $25.9 billion (+9.0%)
eBay Inc. (NASDAQ: EBAY): 41 cents EPS (17.1%) on sales of $2.2 billion (+18.0%)
While some companies may be consolidating, others are reconfiguring and expanding. General Electric Company (NYSE: GE) has acquired a small airplane engine company in the Czech Republic. Selling it's appliance business and adding more to it's portfolio of aircraft and engine capability should be a good move. The Wall Street Journal (subscription required) reported today that GE hopes to improve its competitive position against Pratt & Whitney.
A response from a Pratt & Whitney spokesman played down the increased competition and said that although the company takes this GE move seriously it has a 45-year history producing small engines and holds a solid position in the market place. This type of comment is to be expected and has some validity, but that does not make it good news for P&W.
P&W is a division of another major giant industrial conglomerate United Technologies (NYSE: UTX). Both GE and UTX stocks were up in early morning trading today.
UPDATE: GE closed at $26.91 up $0.40 (1.51%). UTX closed at $61.05 up $1.35 ( 2.26%).
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I own shares of GE.
One of the reasons that big newspapers like The New York Times are doing badly is that they often cover stories long after other media. They like to do long analysis pieces that look back on news. The efforts are usually a waste of time.
The paper decided to run a piece called "Wall Street's Fading Crush On G.E." According to the article, "These days, it's hard to find much love on the Street for what was once the bluest of blue chips."
Memo to The New York Times: Thank you for nothing.
The sentiment on Wall Street turned against General Electric (NYSE: GE) months ago. Not only did it miss earnings, but it became increasingly clear that the company was not rushing to dump underperforming assets like its industrial division.
Over the past five years, while GE shares are flat, the stock of another large U.S. conglomerate, United Technologies (NYSE: UTX) are up over 90%.
The Times may not have gone far enough in its analysis. Beyond being out of favor, GE is now a dog of a stock. Without a major change of direction, its share price is not going to recover.
Douglas A. McIntyre is an editor at 247wallst.com.
"Dividend growth has become increasingly scarce on Wall Street," says says Chuck Carlson, an expert on dividend reinvestment plans. In his The DRIP Investor he looks at two stocks boosting their payouts.
"For the first time in five years, the number of companies in 2007 boosting their dividends declined nearly 6% from the previous year, according to Standard & Poor's. And the slowdown in dividend growth continued in the first quarter of 2008.
"The first quarter marked the seventh consecutive three-month period of year-over-year declines in the number of companies raising dividends. Through the first three months of this year, 19% fewer companies raised dividends than in the year-earlier quarter.
"Even more alarming, 83 companies decreased their dividends during the fi rst quarter, according to S&P. That's up from just 19 in the same period in 2007 and is the highest number of dividend decreases since 1991.
"Nevertheless, there are still plenty of companies willing to boost their dividends, and you can now buy such companies at bargain prices.
According to this article at CNBC, industrial manufacturer Honeywell (NYSE: HON) doesn't see the current recession (or slowdown, if you believe recession is too harsh a term) hurting its plans all that much. Shareholders of the company should certainly rejoice at management's assertion that the company will still be able to deliver somewhere between $3.70 and $3.80 in earnings per share for 2008.
Reaffirmation is always a good thing in a market as tempestuous as this one has been. The question is, when you see a news item such as this, what actionable inference can you take from it? In other words, should you be looking at Honeywell? Investors should indeed perform some due diligence on the company, because based on the current price of the stock, Honeywell isn't overly pricey. Plus, the stock is really close to a 52-week high. I'm not the biggest fan of buying at 52-week highs, but for those who believe in trading via chart science, a stock near the top end of a range is oftentimes attractive since, in theory, a majority of the weak holders will be out of it by that point.
But being patient for a pullback is usually a virtue with any strong stock. And here's something else to consider. Competitor United Technologies (NYSE: UTX), which has a similar dividend yield to Honeywell, is further away from its 52-week high, but well off its 52-week low. Does that make UTX more attractive? Possibly. And Goodrich Corp. (NYSE: GR), while not having as high a dividend yield, is also not at a 52-week high. So while the reaffirmation bodes well for Honeywell, definitely kick the company's financial tires a bit before making any decision, and look around to similar companies that you might think are better values.
Disclosure: I don't own shares in any company mentioned here; positions can change at any time.
Readers of this space know that selected defense contractors are my preferred plays, growing U.S. economy or not. (But let's hope it's a growing U.S. economy). And the reason for the defense contractor bullishness is obvious enough. The geopolitical climate can change, of course, but it looks like defense, national security and anti-terrorism efforts will remain at the top of the U.S.'s concerns, for the foreseeable future.
Further, when one can combine a defense contractor with an industrial play, including commercial aviation, the potential exists for superior return on equity. And with the above in mind, United Technologies is worth a review.
United Technologies (NYSE: UTX) is one of those handful of stocks in which you can buy 200 shares or 50 shares for your child's college fund, and then look back on it in 10 years and be very glad you did.
Here are some attributes: Leadership position in high-value-add sectors, substantial defense contracts, infrastructure/capital improvement businesses, technological leadership, diversification and operational balance, economies of scale, massive amounts of engineering talent, long history of steady earnings growth and dividend growth. The Reuters F2008/F2009 EPS consensus estimates for UTX are $4.88/$5.45.
TheStreet.com's Jim Cramer says that rebuilding from natural disasters can alter the growth picture for a country.
Is it Katrina all over again? Or is it bigger? Much bigger? That's what I am thinking about this Chinese earthquake.
Katrina distorted the U.S.'s growth pattern for more than a full year. The raw materials, the effort, the work, the reconstruction affected businesses from small-scale retail to refining and infrastructure.
We don't really know how China works, although a lot of people tell us they do. To me, the Chinese are always a day away from revolution or civil war and the trick of the government is to stay one step ahead of the posse. (Chinese hands will dispute that, but you have to appreciate that it takes a special skill to be wrong for more than a century and still maintain credibility.)
That means massive reconstruction: bricks, lumber, cement, steel and all the trimmings. Massive imports, not controlled by the Chinese and their little negotiation games like they play with iron and steel and coal. Just full-bore buying and something that could take growth for China back to the levels that everyone thought it couldn't absorb without more inflation.
TheStreet.com's Jim Cramer says investors should be negative, but they have to keep an eye out for rallies.
Have you looked at the charts lately? I still carry them around and, frankly, have been reluctant to sit down and look at one after another the way Helene Meisler has for years and years.
But I have forced myself to do so since this year began just to remind myself that this bear market is a vicious one and you better have a darned good reason to buy a stock because you are most likely going to lose money otherwise.
The charts are amazingly bad. The vast majority of stocks are simply awful. You eliminate the oils, the golds, the ags, you have nothing, I mean, really, nothing. You can see that an Avon (NYSE: AVP) (Cramer's Take) could rally or maybe a Coke (NYSE: KO) (Cramer's Take), and you can make a case for the utilities to bottom on interest rate compares but that's really about it. The banks? They all look like they have no bottom.
Maker of Otis elevators and Chubb security systems, United Technologies Corp. (NYSE: UTX), announced Sunday that it had made an unsolicited $2.63 billion offer for Diebold Inc. (NYSE: DBD). Diebold is one of the largest makers of automated teller machines and voting machines, and United Tech's move comes as a part of its plan to extend its security business and presence in China.
United Technologies announced it first approached Diebold about a possible deal two years ago but nothing had materialized thus far. United Tech announced that its current bid amounts to $40 a share, a 66% premium to Diebold's closing price of $24.12 on Friday. The company also said a it may increase its offer if it is sees more detailed information.
George David, United Technologies' chairman and chief executive, stated that the "transaction creates significant and immediate value for Diebold shareholders with no operational risk, while creating long term value for UTC shareholders."
President Bush recently submitted a $3.1 trillion dollar budget to congress with the biggest proposed increases in defense spending, and homeland security. The Pentagon would get a $35 billion increase to $515 billion for core programs, about 7% with war costs additional (but how much is additional?) This further supports my investment posture for this year and next that the defense sector is the place to be as I posted earlier today and many times over the past few months -- the BIG BUYS.
Some of our big defense contractors, all of which should benefit to some degree include: Boeing (NYSE: BA), General Dynamics (NYSE: GD), Lockheed Martin (NYSE: LMT), Northrop Grumman (NYSE: NOC), Raytheon Company (NYSE: RTN), and United Technologies (NYSE: UTX). I am not suggesting that you jump into these stocks immediately, but you should add them to your watch list. Perhaps, for some investors dollar cost averaging into them over six months would make sense. Each has a varying degree of exposure to defense spending. For example, United Technologies is the parent of Sikorsky helicopters which makes the Black Hawk. Lockheed Martin and Boeing make fighter jets. Raytheon makes defense electronics and missile while General Dynamics and Northrop Grumman supply warships to the US Navy. Northrop also makes aerial vehicles that are being used in the Iraq War.
TheStreet.com's Jim Cramer says companies with great earnings might be worth a look.
Stocks are cheap on an earnings basis -- unless they have earnings risk. If they have no earnings risk, they are not cheap.
Therein lies the conundrum on a day like today. Let's say you went CAMPing today: You bought Coke (NYSE: KO) (Cramer's Take), Altria (NYSE: MO) (Cramer's Take), Merck (NYSE: MER) (Cramer's Take) and Procter & Gamble (NYSE: PG) (Cramer's Take). Do you know that even after the precipitous falls last week and the declines we expect today, that none of them is historically cheap? Do you know that most of them are up significantly since last summer?
That's a real issue. You aren't buying them at rock bottom prices because they are up so much already.
Now, let's take the examples of the cyclical stocks in the Dow. They are cheap: United Tech (NYSE: UTX) (Cramer's Take), Honeywell (NYSE: HON) (Cramer's Take), Alcoa (NYSE: AA) (Cramer's Take). But their earnings estimates are considered vulnerable to the worldwide slowdown and a U.S. recession.
You can chicken out, buy some Microsoft (NASDAQ: MSFT) (Cramer's Take), which has good earnings, or IBM (NYSE: IBM) (Cramer's Take), which just had great earnings, and in many ways those will be cheaper.
United Technologies (NYSE: UTX) will report Q4 EPS on January 23. UTX February option implied volatility of 32 is above its 26-week average of 26 according to Track Data, suggesting larger risk.
MasterCard (NYSE: MA) closed at $176.88. MA will report Q4 EPS on January 31. MA February option implied volatility of 67 is above its 26-week average of 41 according to Track Data, indicating larger price fluctuations.
Options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
Solar energy presents two challenges. The first is to gather energy from sunlight. The other is to store it for future use. United Technologies (NYSE: UTX) believes that it has found a solution for the second problem.
According toThe Wall Street Journal, UTX unit "Hamilton Sundstrand is scheduled to announce that it has teamed with US Renewables Group to commercialize a new type of solar-power plant that will use molten salt to store the sun's heat."
Solar power stocks were among the biggest winners on Wall Street in 2007. As an example, shares in SunTech Power (NYSE: STP) moved from a 52-week low of $31.41 to close the year at $82.32. As long as the price of crude stays high, solar power shares are likely to do the same.
The United Technologies announcement is a sign that sun-driven alternative energy is entering the big time. The company had almost $14 billion in revenue last quarter, but some of its businesses like cooling and elevators are likely to face slower growth.
What better idea for UTX than to use some of its huge resources to get into one of the fastest growing industries in the world.
Douglas A. McIntyre is an editor at 247wallst.com.
As the second quarter earnings crunch begins in earnest this week, the bear market has investors jittery and prognosticators spinning out dire warnings. In the wake of mixed results from 
President 
United Technologies
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Stocks have their worst week in six years
Why haven't the Republicans said much about the economy?
