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United Technologies Expands GTF Engine Repair Supplier Base


United Technologies Corporation’s UTX operating segment, Pratt & Whitney, recently announced its decision to include five repair suppliers in its global network of providers that maintain the Geared Turbofan (GTF) engine. This, in turn, will support the PW1100G-JM engine.

Notably, the new suppliers to join other GTF maintenance, repair and overhaul (MRO) providers across the globe include Turbine Controls, StandardAero, TWIN MRO, ACMT and Lewis & Saunders. These suppliers will join as the first third-party suppliers in the network of GTF engine repair providers. Currently, the GTF MRO network consists of Pratt & Whitney, MTU Aero Engines, Lufthansa Technik, Japanese Aero Engines Corporation and Delta TechOps.

Earlier this week, Pratt & Whitney also announced that JetBlue Airways Corporation JBLU has decided to power another 45 Airbus A320neo family aircrafts with its GTF engines. The decision follows a previous order of 40 GTF-powered A320neo family aircraft.

Existing Business Scenario

Excessive reliance on suppliers, including third-party contract manufacturing and commodity markets, to secure raw materials, parts, components and sub-systems exposes United Technologies to market price volatility and availability risks. A disruption in deliveries from suppliers, capacity constraints, production disruptions, price changes, or decreased availability of raw materials or commodities is likely to have an adverse impact on its ability to meet delivery schedules and thereby increase operating costs.

Nevertheless, in the past six months, the company managed to outperform the industry. Shares of United Technologies have gained 3.1% against the industry’s decline of 12.5%.

Moreover, the Zacks Rank #4 (Sell) company’s financial performance depends on the conditions of the construction and aerospace industries. While rise in interest rates may reduce residential construction in the United States, commodity inflation is expected to increase the price of raw materials thereby affecting the company’s margins. Also, market conditions in Carrier’s North American residential business appear challenging.

Stocks to Consider

Some better-ranked stocks from the same space include Federal Signal Corporation FSS and Danaher Corporation DHR. While Federal Signal sports a Zacks Rank #1 (Strong Buy), Danaher carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Federal Signal surpassed estimates in the trailing four quarters, with an average positive earnings surprise of 16.5%.

Danaher surpassed estimates in the trailing four quarters, with an average positive earnings surprise of 2.8%.

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