Atlantic Equities Concerned With United Technologies Visibility, Downgrades

In a report published Wednesday, Atlantic Equities analyst Richard Radbourne downgraded the rating on United Technologies Corporation (NYSE: UTX) to Neutral, while lowering the price target from $128 to $110.

Radbourne explained the downgrade, saying that he and "investors will need time to rebuild conviction that factors undermining the H215 outlook are not more structurally enduring."

The analyst believes that the stock's valuation is likely to continue to be depressed until the company is able to return to its historical habit of "under-promising and over-delivering."

United Technologies has revised its FY15 EPS guidance downwards, which the analyst believes is largely due to overaggressive planning assumptions, especially for its UTAS and Otis businesses, rather than due to any big structural issues.

"Moreover, better visibility into the longer term profit trajectory at Otis will be required where UTC acknowledges it will focus on regaining share lost in recent years, which we believe could result in incremental margin pressure and remain a lingering concern," the Atlantic Equities report stated.

The analyst, however, expressed confidence in the senior management's ability to bring United Technologies back on track, although sustainable recovery in the valuation multiple might take several quarters, with investors looking for stability in the EPS and greater visibility into the factors impacting the FY15 guidance.

The FY15 and FY16 EPS estimates have been lowered.