United Technologies Corporation (UTX): Ready to Fly Says Goldman

Forget about The Boeing Company (NYSE:BA) and buy United Technologies Corporation (NYSE:UTX), so says Goldman Sachs. Analyst, Noah Poponak upped the aerospace company to "Buy" from "Neutral" with a fresh, new price-target of $138 – upside potential of 19.76% to target.

United Technologies Corporation provides high technology products and services to the building systems and aerospace industries worldwide. The Company operates in six segments: Otis, Carrier, UTC Fire & Security, Pratt & Whitney, Hamilton Sundstrand and Sikorsky.

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Otis, Carrier and UTC Fire & Security serve customers in the commercial, government infrastructure and residential property sectors worldwide. Carrier also serves commercial, industrial, transport refrigeration and food service equipment customers. Pratt & Whitney, Hamilton Sundstrand and Sikorsky primarily serves commercial and government customers.

Poponak writes, "We believe the end-market stars are aligning for United Technologies. The company is well positioned in a strengthening Commercial Aerospace aftermarket, it is a market leader in its non-residential construction market, and its largest profit generators in the European construction markets appear to be bottoming. Pension and FX are moving to tailwinds, there is upside to consensus estimates, and valuation is attractive."

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The analyst targets a price-to-earnings (P/E) ratio of 17.6 on his 2015 earnings-per-share (EPS) estimate of $7.84 to make the $138 target. It is no coincidence that Poponak picked the target P/E, it is the industry average.

However, United Technologies' average P/E during the last half-decade was 15.50 with a range of 8.68 to 18.89. At its average P/E, UTX would price out at $121.52. That being written, the aerospace company's annual EPS growth for the last five years was 9.23%, which means the industrial goods company tends to trade at a 68% premium to the bottom line's expansion.

Using Goldman's 2015 estimate and 2014's consensus EPS outlook of $6.82, UTX's profits per share would grow 14.96% year-over-year (YoY). Applying the typical P/E to earnings to premium translates to a price-to-earnings ratio of 25.13. That requires Wall Street to pay well beyond United's recent range, but if they did, $138 would be small compared to $197.

Overall: It wouldn't be too much of a stretch for United Technologies Corporation (NYSE:UTX) to trade at 17.6 times earnings and hit Noah Poponak's $138, provided UTX makes his 2015 estimate of $7.84.