Do not place all your eggs in a single basket, echoes an old saying. United Technologies Corporation (NYSE:UTX), Honeywell International Inc. (NYSE:HON), and General Electric Company (NYSE:GE) have taken the saying to heart. Their sheer size is only a footnote when looking at the many branches and sectors in which the companies are present. Having returned to an upstream path after the recession, let’s see which one is the most rewarding.
Few companies were able to successfully navigate through the last recession. United Technologies Corporation (NYSE:UTX) is one of them. Sure, its stock price took a dive, but recovery took only 12 months. Now, the company has found steady growth, making itself worthy of further analysis thanks to urbanization, and acquisitions.
In most western countries, the migration from the countryside to the city was completed during the last century. In China and India, the story is different, and is increasing the demand for United Technologies Corporation (NYSE:UTX)’s products. Heating and ventilation systems, safety and security systems, and elevators are the most popular articles in the firm’s portfolio. In comparison with the West, elevator availability in China and India is well below the average. Additionally, the company has undertaken an internal restructuring in order to improve cost efficiency and retain its market leading position.
Another important sector where United Technologies Corporation (NYSE:UTX) has good prospects is aerospace. The industry has been hurt by the recession and the Sequester (cut in U.S. budget). However, the company acquired Goodrich and AIE to strengthen its portfolio. Keep in mind that Aerospace Systems and Pratt & Whitney generated almost 40% of total revenue in 2012. And, even if the Sequester does cut the budget significantly, the firm can take refuge in the increasing demand for commercial airliners.
Management has been great for two reasons: capabilities and dividends. United Technologies Corporation (NYSE:UTX) has proven to possess an executive board powerful enough to dictate a new path, and to follow through with positive results. The quick recovery from the last economic recession provides enough evidence. Additionally, shareholders have been rewarded kindly, and the company holds the highest dividend among competitors. Evidence can be seen in the return of 70% of free cash flow during the last seven years. Besides the stock valuation (17 times P/E), United Technologies Corporation (NYSE:UTX) is a buy because of its finances and history of rewarding shareholders.
Diverse stock #2: Honeywell International
Another company that withstood bad economic weather is Honeywell International Inc. (NYSE:HON). Diversification among several industries and sectors, coupled with different cycles, helped maintain its revenue and cash levels. Aided by internal restructuring and acquisitions, the company held on to its leading market positioning.
On the restructuring front, the company chose to place its focus on its core businesses, shedding away non-competitive operations. In line, the acquisition of RAE Systems and UOP have further widened its portfolio and vertically integrated the conglomerate. Now, the company can offer the complete gamut of gas detection and safety solutions. Meanwhile, UOP gave the company, and the chemicals branch especially, a much-needed boost on operating margins.
On another count, the introduction of new products by Honeywell International Inc. (NYSE:HON) will draw a new pool of customers. Worthy of noting are: a new series of brake pads and a Wi-Fi enabled thermostat. Also, commercial airliners’ resurgence will spill over some benefits; via jet engine design and flight instruments, the firm will generate more revenue. But, most notably, the company has interesting growth potential in China where investment is already under way.
Dividends for Honeywell International Inc. (NYSE:HON) are not as attractive as those of United. Nevertheless, the stock is similarly priced at $80, with a P/E of 20 times, and the company’s financial indicators are above the industry averages. Hence, it is recommended to buy this stock too.
