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United Technologies (UTX) Likely to Acquire Rockwell Collins

Zacks

United Technologies CorporationUTX, the parent company of Otis Elevators, and Carrier air conditioners intends to expand its foothold in the aerospace industry with the acquisition of Rockwell Collins, Inc. COL.

Per undisclosed sources, the company has submitted an offer to acquire the aircraft component manufacturer. Rockwell Collins has a market capitalization of $19.3 billion. This acquisition will enable United Technologies bulk up its aerospace group, separating it from its other industrial units. This deal has not yet been confirmed, as both the companies are currently in talks.

If the deal is sealed, Rockwell Collins’ commercial and military aircraft avionics business will merge with United Technologies' wide portfolio which includes aircraft engines, structures, cockpit and cabin controls, ventilation systems and other electronic and mechanical devices used in aviation. The merger will help United Technologies strengthen its client base as well as help it gain an edge over its peers.

The company's Pratt & Whitney engine unit has been facing production related problems with its latest Geared Turbofan engine. This, in turn, has led to the delays of new Airbus A320neo aircraft. The company has also been witnessing weakness in demand for Otis elevators, particularly in China.


On Mar 6, 2017, UTC Climate, Controls & Security (“CCS”) completed its planned acquisition of EcoEnergy, Wipro Limited’s WIT energy services business division based in Bengaluru, India. EcoEnergy is a leading energy management solutions company. The completion of the CCS acquisition along with the Otis buyout closed last year, contributed to the company’s growth in the second quarter. The company expects to invest around $1−$2 billion in mergers and acquisitions this year. Similarly, if the Rockwell acquisition is completed, we expect it to be accretive from the following quarter.

United Technologies’ shares have recorded an average year-to-date return of 10.8%, outperforming the industry’s gain of 0.1% in the same period. The company is keen on expanding its portfolio with its ongoing acquisition spree, which will boost its top line.

United Technologies carries a Zacks Rank #3 (Hold). A better-ranked stock in the same space is Honeywell International Inc. HON carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Honeywell has long-term earnings growth expectations of 9.5% and is currently trading at a forward P/E of 19.86x.

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