United Tech. (Utx) Full Valuation Analysis

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Industry Classification
United Technologies Corporation (UTX) has 5 different major segments. These five segments can be broken down into three major industries. Pratt & Whitney, Hamilton Sundstrand, and Sikorsky Helicopters can be classified as Aerospace/Defense (AEROD). Carrier can be grouped in the Heating & Air Conditioning Equipment Manufacturing Industry (HVAC). The Otis segment belongs to the Elevator, Millwright & Machine Rigging Contractors Industry. The company as a whole can be classified as a conglomerate; however, analyzing the Conglomerate Industry as a whole would not be beneficial for valuation. United Technologies as a company is 42% Aerospace/Defense products, therefore that industry will represent a majority of the report. UTX as a whole displays cyclical behavior. 1. Aerospace/Defense

The Aerospace/Defense Industry is in the decline stage of their life cycle. There are several contributing factors for this assumption. Industry value added for aerospace/defense has been on the decline for the past several years. Additionally, military spending is expected to decline in the following years as well. Product development has also slowed in recent years. A majority of new products are upgrades from older products. Companies in this industry have also been shifting production to countries outside the U.S. for cheaper manufacturing costs. Cost competition is causing smaller firms to be forced out of the industry and contributing to the overall decline of the industry. Aerospace/Defense displays a defensive behavior. However, at a time of war the industry is independent of gross economic behavior.

2. Heating & Air Conditioning Equipment Manufacturing (HVAC)
HVAC as an industry is in the growth stage of their life cycle. Although the products within the industry are not new, they are now viewed as necessities of construction. Improving technology and global manufacturing is making the industry more technical in nature compared to the past. Major growth in this industry is dependent on growth in the overall construction industry. The HVAC industry displays cyclical behavior.

3. Elevator, Millwright & Machine Rigging Contractors (EMMRC)
The Elevator, Millwright & Machine Rigging Contractors Industry is in the mature stage of their life cycle. Industry growth is consistent with overall growth of the economy. The Elevator, Millwright & Machine Rigging Contractors Industry displays cyclical behavior. External Factors

1. Technology
a. Aerospace/Defense
The Aerospace/Defense Industry relies heavily upon increasing technology. Advances in technology in this industry have a direct impact on safety, performance, quality, cost, and competitive advantage. All of these are crucial for success in the industry. New technologies are constantly being introduced to the industry. Research and development expenditures amount to 3% of industry revenues. These discovered technologies are normally applied to current products and are not usually completely new products by themselves. The industries players must constantly expand their technologies to remain viable in the industry; however, they do not face a major threat from completely undeveloped technologies.

Technology advances in the industry are high. The HVAC Industry faces heavy competition directly influenced by increasing technologies. Mainly, climate control systems and improvements in remote control of HVAC systems are the primary increasing technologies.

Elevators, escalators, and people movers are not directly threatened by advanced technologies. Overall, the industry faces average increases in technology. These improvements primarily affect installation and diagnostics of current systems. The producers of elevators and escalators don’t face much threat from new technologies, but advancing technologies in the future may decrease installation and maintenance costs. In...
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