Shares of United Technologies (RTX) continue to set fresh, all-time highs after the company released its full-year results for 2013 earlier last month. Shares had seen a great run-up in recent years, but the forces that were driving that climb are fizzling out. What exactly is left that can propel the company's shares to trade higher?

Acquisitions drive record results
United Technologies reported 9% sales growth with revenues coming in at $62.6 billion. This top-line growth was accompanied by solid margin expansion with operating margins increasing by 130 basis points to 15.3% of sales. As a result, earnings grew by 16% to $5.7 billion.

This growth has been driven by the aerospace business of the company. Back in 2011, United Technologies bought aerospace company Goodrich in a $18.4 billion deal which included nearly $2 billion in debt held by the company.

Focus on costs boosts margins
United Technologies listened to plane builder Boeing, which urged its suppliers in recent years to consolidate their operations, thereby avoiding new delays in the development and production process. 

Being an industrial conglomerate, United Technologies has focused on aerospace and buildings systems, taking advantage of two mega trends: the continued growth of air travel and increasing urbanization. The company can command higher margins as the owner of the world-class Pratt & Whitney engine business, UTC Aerospace Systems, and the Sikorsky unit. The internal climate business continues to show healthy growth as well, so does its elevator brand, Otis.

The company achieved $250 million in aerospace synergies in 2013, on the back of the Goodrich deal. Synergies are expected to run at a rate of $500 million per year by 2016, creating an additional boost in earnings to the tune of $250 million per year.

Looking into 2014
For 2014, the company is anticipating earnings of $6.70 per share, plus or minus $0.15. This suggests nearly 8% earnings-per-share growth at the midpoint of the range. This is despite the fact that revenues are expected to be up by roughly $1 billion.

The strong momentum in the fourth quarter, with organic growth rates of 4% makes the company confident that it can achieve those targets.

The competitive field
Over the past decade, United Technology has created very decent returns for its shareholders, as shares have more than doubled. Of course, investors received fair dividend yields on top of this.Shares have mostly moved in tandem with those of Honeywell (HON 0.68%), while easily beating the performance of General Electric's (GE 1.44%), which suffered from the exposure of its financing business during the 2008 crisis.

The company's 15.3% operating margin for the year of 2013 is very solid, but slightly trailed GE's industrial activities for the year. It is also much higher compared to Honeywell's, which reports margins in the low double digits. At 20 times annual earnings, United Tech's valuation sits between that of Honeywell (22 times) and GE (18 times).

Fortunately the focus on aerospace leaves the potential for further margin gains -- the company is focusing on deleveraging the balance sheet, while benefiting from higher synergies. The two competitors mentioned above have more financial firepower available for deals, whereas United Technologies is hindered by its debt burden of over $20 billion.

While Honeywell and United Technologies both pay a dividend yield of roughly 2%, GE pays its shareholders a 3.4% dividend yield.

Implications for investors
United Technologies made some solid strategic choices in the recent past which have been applauded by shareholders. The company is trading at all-time highs since shares have risen by a third over the past year, pushing up the valuation to its current level.

With the balance sheet still carrying a lot of debt that resulted from the Goodrich deal, the best days might be over. I don't see many drivers left creating the potential for outperformance versus the wider stock market.