United Technologies (NYSE:UTX) is a multi-industry conglomerate comprised of world-class franchises in elevators/escalators (Otis), jet engines and aerospace supply (Pratt and Whitney), HVACf (Carrier), fire/security, and refrigeration. United Technologies’ aerospace margins have been under pressure as Boeing and Airbus moved into the aftermarket, squeezing their supply base. Despite this risk, we believe the company is an attractive long-term investment opportunity at 14 times forward earnings. United Technologies has premier global franchises with attractive long-term growth potential and a high degree of visibility based on its substantial backlog (over seven years) of aerospace contracts. United Technologies recently acquired Rockwell Collins, making the combined company the largest global aerospace supplier. The launch of its new jet engine platform should drive earnings growth in the years ahead. Meanwhile, United Technologies has announced plans to split into three companies, which could create substantial shareholder value; we estimate each of its world-class franchises trades 15 to 20% below “pure-play” peers. United Technologies was a 1.4% position on December 31.
From Dodge & Cox Stock Fund's fourth-quarter 2018 shareholder letter.
