United Technologies Corporation: A SWOT Analysis

In this article, we’ll do a SWOT analysis of United Technologies Corporation (UTX), including its strengths, weaknesses, opportunities, and major threats.

Below is a list that summarizes UTC’s major strengths.

• UTC has an exceptional record of business growth over the last 81 years.
• UTC has a strong and diversified international presence with customers around the world.
• UTC is a strong market player in the industrial and buildings businesses as well as the aerospace business.
• UTC has a robust R&D (research and development) capacity and strives to make innovations in order to gain market share.
• UTC has a reputed and strong management team backed by a legacy of strong leadership.
• UTC has a strong backlog and has been witnessing good order growth for the past couple of years.
• UTC is a strong dividend payer, which makes it an attractive investment option.

The following list summarizes some of UTC’s main weaknesses.

• UTC has high debt levels.
• UTC’s aerospace segment, especially Sikorsky, is dependent on government contracts, which makes it volatile.
• UTC is heavily dependent on the growth of various economies, including the United States, since its businesses are related to construction, defense, and aerospace.

Now let’s take a look at UTC’s opportunities.

• Otis has growth opportunities in various emerging markets such as China, India, and Brazil, since a number of towns are being converted to cities.
• Rising defense spending across Asia-Pacific and the Middle East is creating opportunities for military aircraft.
• The rising middle class offers growth in commercial aircraft.
• The electronic security market is growing with a demand for newer and technologically superior products.
• The company expects to reduce its US defense cuts due to rising threats around the globe.
• There are acquisition opportunities to fit the portfolio of services.

What threats does UTC face in the near future?

• Government regulations are stringent, and raw material prices are growing.
• There’s pressure on margins of the aerospace systems.
• A stronger US dollar will hurt exports.
• Volatility in foreign exchange will affect the bottom line.

UTC makes up 3.76% of the holdings of the iShares U.S. Industrials ETF (IYJ). Other aerospace companies included in IYJ are L-3 Communications (LLL), Honeywell International (HON), and General Dynamics (GD). These companies have 0.40%, 2.94%, and 1.60% holdings, respectively, in IYJ.