UTX to Upgrade Repair Facility – Analyst Blog

Pratt & Whitney, a division of United Technologies Corp. (UTX) has entered into an agreement with ITR-Turborreactores, S.A. de CV (an ITP Group Company) to build a Designated Service Provider (DSP) Center of Excellence for repair of JT8D engine parts in Queretaro, Mexico, facility of ITR. ITR, a leading company in aerospace industry, is the world’s largest independent provider of MRO for the JT8D market.

 

The existing facility of ITR in Queretaro provides a wide-range of repair services for JT8D-STD and JT8D-200 engines and an array of engine component repairs. The upgraded facility will also provide repair services to Compressor Vane on JT8D Stator Vanes. This will, in turn, strengthen ITR’s position as a world class provider of MRO (Maintenance, Repair and Overhaul) services for the JT8D market.

 

Pratt & Whitney division (generated about 23.6% of the company’s total revenue for the second quarter of 2010) is among the world’s leading suppliers of aircraft engines for the commercial, military, business jet and general aviation markets. Pratt & Whitney’s Global Services provides maintenance, repair and overhaul services, including the sale of spare parts, as well as fleet management services for large commercial engines.

 

United Technologies has strong market position in aerospace/defense and global infrastructure with a portfolio that includes Carrier, Otis, Hamilton Sundstrand, Pratt & Whitney, Sikorsky and Fire & Security. The company continues to invest in game-changing technology across the business, with its Aerospace companies continuing to make progress on their key development programs. For example, the Pratt GTF core has accumulated more than 260 hours validating the performance expectations, and Sikorsky’s Canadian Maritime helicopter continues its successful flight testing with its first deliveries scheduled for the end of 2010.

 

The company is expected to deliver double-digit earnings growth in FY10, given restructuring savings and proving end-market environment. Emerging markets, particularly India and Brazil, where combined orders for the Commercial business units grew by over 25% during second quarter of 2010, continue to do well.

 

The financial performance of the company is, however, dependent on the conditions of the construction and aerospace industries. The company is also highly dependent on the U.S. government’s budgetary allocation for defense. A reduction in capital spending in the commercial aviation or defense industries could have a significant effect on the demand for United’s products, which could have an adverse effect on its financial performance or results of operations.

 

Though the company has seen considerable improvements in its end markets, the economic uncertainties and risks are not yet over. The recovery in the markets is quite slow and uncertain.

 

United Technologies Corporation was incorporated in Delaware in 1934. The company provides high technology products and services to the building systems and aerospace industries worldwide. Growth is attributable to acquisitions and the internal development of existing businesses. Operating units include businesses with operations throughout the world. Major competitors of United Technologies are Boeing Co. (BA) and General Electric Co. (GE)

 

We continue to maintain a Neutral rating on United Technologies, with a Zacks #3 Rank (Hold recommendation) over the next one to three months.