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Tickers in this Article: UTX, BA, GE, GR, SI, TYC, IR
High expectations are great for a stock when the company delivers and shareholders see nice gains in their portfolio. The trouble with high expectations (and high valuations) is that the market is quick to punish what would otherwise be a solid performance. That would seem to be the biggest risk for United Technologies (NYSE:UTX) these days, as the company continues to sport both solid performance and a healthy valuation.

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The Quarter That Was
Though there were some hiccups, United Technologies reported an all-around solid quarter (and one where revenue exceeded expectations). Revenue rose more than 9% as reported, with 6% organic growth. Top-line growth was led by the Otis business, while Hamilton Sunstrand and Carrier were close behind. Pratt & Whitney and Sikorsky were the laggards this quarter, but both still posted better than 5% revenue growth.

Despite higher input costs, United Technology is holding the line on gross margin and saw more than 20 basis points of expansion here. Operating performance was less solid - adjusted segment operating profit rose about 10%, while company-wide operating profit rose a little less than 9%.

Turbulence in the Largest Business?
UTX investors have had to digest some disappointing news lately pertaining to the Pratt & Whitney aircraft engine business. For starters, it looks as though Boeing (NYSE:BA) is going to "re-engine" the 737 platform with engines from a General Electric (NYSE:GE) joint venture instead of designing a new plane altogether. Second, AMR Corporation (NYSE:AMR) made a splashy aircraft order recently, but it looks like those orders will also favor the GE engine over UTX.

Still, that doesn't change the fact that the outlook for the commercial aerospace business is getting better. The question, though, is whether UTX is really the right play on that trend instead of much more directly exposed names like Boeing or Goodrich (NYSE:GR).

Share Gains, Share Losses
Given that UTX is a diversified conglomerate, there is always a duck-like quality to the company's results (as in, relative calm on the surface, but a lot of turbulence underneath the waterline). While the Otis business is doing well and seeing the benefits of construction in emerging markets like Brazil and China, Finland's Kone seems to be gaining some share.

Likewise, while UTX's Fire and Security business is showing solid growth, it has been trading share lately with the likes of Siemens (NYSE:SI), Stanley Black & Decker (NYSE:SWK), and Tyco (NYSE:TYC). While Carrier is seeing better results than the construction market would suggest and the company's Transicold transport business is doing particularly well, so too is rival Ingersoll Rand (NYSE:IR) and its Thermo King business.

The Bottom Line
There's always going to be noise around a conglomerate like United Technologies, but this is well-run company with good mid- and late-cycle exposure. The quality of this name is not lost on the Street, though, and the stock does not sport a very compelling discount to fair value. Accordingly, there are better ideas out there for investors looking for exposure to this part of the economic cycle and/or emerging trends in aerospace. (For additional reading, also check out Conglomerates: Risky Proposition?)

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