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United Technologies to Revamp Aerospace Unit In & Out - Analyst Blog

Zacks Equity Research
Updated

Industrial goods manufacturer United Technologies Corp. (UTX) recently made some startling announcements to revamp its aerospace unit. These include an overhaul of its organizational structure in the aerospace business along with some key changes in the leadership positions within it.

The aerospace business of the company consists of Sikorsky aircraft and the UTC Propulsion & Aerospace Systems (PAS), which includes UTC Aerospace Systems and Pratt & Whitney divisions. Earlier on Jul 26, 2012, United Technologies acquired Goodrich Corporation and combined it with the legacy Hamilton Sundstrand division to form a new division named UTC Aerospace Systems. The operations of the company are presently classified into five principal business segments: Otis; UTC Climate, Controls & Security; Pratt & Whitney; UTC Aerospace Systems; and Sikorsky.

With the successful integration of Goodrich Corporation, United Technologies now intends to eliminate the UTC PAS organizational structure. Consequently, Pratt & Whitney and UTC Aerospace Systems, which were both formerly under the PAS structure, will continue as stand-alone business units.

At the same time, United Technologies announced the scheduled departure of Alain Bellemare as the President & Chief Executive Officer of UTC PAS at the end of the month. As a result of this organizational reshuffle, Dave Gitlin has been promoted as the President of UTC Aerospace Systems and will report directly to UTC President & Chief Executive Officer Gregory Hayes. Pratt & Whitney President Paul Adams will also report directly to Hayes.

United Technologies anticipates that the streamlined organizational set-up would enable it to better serve its customers. In addition, the company expects that the strategic moves will further ensure a successful entry and production ramp-up of its Geared Turbofan engines to thwart intense competition from peers like General Electric Company (GE), Honeywell International Inc. (HON) and Rolls Royce.

The company is seeking potential acquisition targets to achieve aggressive revenue targets and regain its strong growth momentum. Economic recovery in Europe and China will likely have a strong positive impact on United Technologies. However, at present, United Technologies seems to be facing challenges on most fronts, and it would be prudent for investors to remain on the sidelines for some time.

United Technologies currently has a Zacks Rank #3 (Hold). Another company in the industry that is worth considering at the moment includes Swire Pacific Limited (SWRAY), which carries a Zacks Rank #2 (Buy).


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