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America's Largest Helicopters May Be for Sale. But Should United Technologies Discard Its Crown Jewel?

By Rich Smith - Feb 2, 2014 at 5:45PM

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Why United Technologies might sell its Sikorsky brand and America's largest helicopter -- the CH-53E Super Stallion.

Have you heard the news? United Technologies (RTX -2.55%) may soon sell or spin off its Sikorsky helicopter division.

Rumors of the whirlybird spinoff sparked heated debate among investors: Is it true that United Tech will unload one of its best-known brands? And if so, why? (And for how much?)

The answer to that last question is pretty easy. A true industrial conglomerate, United Technologies owns such valuable brands as Otis elevators, Carrier air conditioners, Pratt & Whitney engines -- and, of course, Sikorsky helicopters. As a whole, the company is valued at 1.65 times annual sales.

But historically, high-quality defense companies -- and United Technologies is the eighth biggest defense contractor in the world -- tend to sell for only about one-times their annual sales. With $6.2 billion in revenue recorded over the past year, a separate Sikorsky division would therefore probably be valued at about $6.2 billion -- a significant discount to the valuation of United Technologies as a whole. And this would be true whether Sikorsky is sold to an acquirer like Boeing (BA 1.29%), Textron (TXT -1.40%), or Britain's BAE Systems (BAES.Y 0.48%) -- or whether it gets spun off as an independent entity.

As for the other questions, though, those are a bit trickier. In the following slides, we'll lay out for you the pros and possible cons of a decision by United Technologies to unload Sikorsky. Read on, and prepare to be amazed -- and make sure to check out our special free report at the end. 


 
 

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Stocks Mentioned

The Boeing Company Stock Quote
The Boeing Company
BA
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Raytheon Technologies Corporation Stock Quote
Raytheon Technologies Corporation
RTX
$90.25 (-2.55%) $-2.36
Textron Inc. Stock Quote
Textron Inc.
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$62.76 (-1.40%) $0.89
BAE Systems Stock Quote
BAE Systems
BAES.Y
$37.64 (0.48%) $0.18
Kaman Corporation Stock Quote
Kaman Corporation
KAMN
$33.64 (-3.97%) $-1.39

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