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United Technologies Finds Love In An Elevator

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On a stellar day for the markets, the company behind Otis stood out.

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United Technologies

Those poor people -- 28 of them, and stuck underground yet -- recently trapped for over an hour in an elevator should be rewarded for their heroic patience with stock options in United Technologies Corp (UTX). The Connecticut conglomerate, arguably best known for its industry-leading Otis elevators, got a huge lift after announcing robust results. Shares finished 4.30% higher in a standout performance, even on such a stellar day, as first quarter net income surged 17% to $1.01 billion, or $1.11 per share, from $866 million, or $0.93, a year earlier. It earned $1.13 ex-items, which beat Street estimates by some nine cents. Going forward, the firm also issued an upbeat outlook. United Technologies now expects to earn between $5.25 and $5.40 per share for the full year; consensus stood at only $5.37 on an outfit whose other operating segments include Sikorsky helicopters, UTC Fire and Security, Pratt and Whitney, and Hamilton Sundstrand. Analyst Joseph Nadol at JP Morgan said, "We had anticipated that the first quarter could be particularly strong…[but] it was even more impressive than we had expected, driven by the acceleration of organic growth to 9%."

This company is arguably the Dow Average's Rodney Dangerfield, not commanding anything like the respect or column inches of other blue chips, but it has been a reliable performer since being established in the depths of the Depression. Their long-cycle businesses are rebounding nicely in an improving economy and operating margin surged some 70 basis points from 12 months earlier, to 13%. New Otis equipment orders also gained 17% in the quarter. Factor in a 2.22% dividend yield, and we can see why so many equity analysts are big believers in the stock. Indeed Bank of America-Merrill Lynch has United on its "Focus List" of favored shares, which is Wall Street's best performing portfolio of the past six months or so. Concerns? CFO Greg Hayes admits ever increasing commodity prices are one of the "biggest threats", while "emerging supply chain disruptions" in Japan demand attention. Boeing also dealt Pratt & Whitney a blow when it opted for General Electric (GE) and Rolls Royce to supply engines for their 787 Dreamliner. Still, on an afternoon like this you don't need to be in a Sikorsky to admire the view. "Helicopter Ben" Bernanke could certainly do a lot worse as an investment.

Wells Fargo

Wells Fargo & Company (WFC) recently embarked upon a major marketing campaign which featured its iconic stagecoaches marching through Manhattan. The onetime Pony Express operator, founded in 1852, is known throughout the land as the company that "united east with west", but on a day when almost everything in sight headed north, shares of this San Francisco firm sure hurried south. In the market's best day for four months, Wells fell 4.12% and was the S&P 500′s single worst performer for much of the session. While first quarter net income rose 50.5% to $3.57 billion and EPS of $0.67 beat Street projections by a penny, issues remain. Revenue declined 5% to $20.33 billion and, as America's biggest originator of mortgages, it experienced lower income in this category amid a rising interest rate environment for home purchases. CFO Tim Sloan just admitted on this afternoon's Closing Bell with CNBC's Maria Bartiromo that there is "no question" the pace of economic growth has been "uneven", with a "still sluggish" consumer among the headwinds. Nonetheless Sloan said Wells was "really pleased" with the bank's "great deposit growth." There's no doubt this company weathered the worst of the Great Recession far better than many other financial firms, and its October 2008 acquisition of Wachovia Corporation from Citigroup (C) was widely seen as a shrewd move. A dividend increase last month, allied to 200 million in share buybacks, provide a measure of support. But credit quality, especially as regards to commercial loans and charge cards, is an ongoing concern and one reason why shares are so substantially underwater over the past year. Today the stock was merely in hot water, but it will take a gargantuan effort to turn back the clock to Wells' Hot Tub Time Machine heyday.

Also check out Wells Fargo Wagons Run Roughshod Over Stress Test and Fare Thee Well, Wells Fargo.

Yahoo!

Who knew it would take the sudden appearance of a bear at Yahoo! Inc. (YHOO) offices to set off a bull run at the Internet outfit? Intel (INTC), another high tech stock left for dead, had an even better day of course but today's 4.66% share-price increase in what is still the most-visited web portal in America, lest we forget, suggests there may yet be a Flickr of hope for Yahoo! (Today's performance deserves the exclamation point.) Its biggest single session increase for five months followed better than expected Q1 sales. With domestic visitors growing 15% in March, to 179.5 million annually, advertising is having a banner start to the year. Core revenue of $1.06 billion came in above the $1.05 billion Wall Street was expecting at this 17-year old Sunnyvale, California outfit, an age which makes it a moldy Methuselah in Internet terms. Certainly with 75-year old Carl Icahn out and 80-year old George Soros in, CEO Carol Bartz still has her work cut out to compete in this social networking age of ours. But per share earnings of $0.19 ex-items, $0.03 ahead of average analyst estimates, "gives her some breathing room," in the words of researcher Kerry Rice with Wedbush Securities. That he still rates the online property powerhouse an 'Underperform' hints there is still much work to be done however. Slumping search (down 19%) revenue continues to hurt margins and a new management team may need more time to address underlying traffic share losses.

Why I Love Yahoo and Money Can't Buy Yahoo Love provide both a bull and, well, bear case on the company.

Hanesbrands

The woman arrested at JFK Airport not long ago with $170,000 stuffed in her underwear to avoid paying Sudanese property taxes would arguably have been better off buying shares of apparel essentials outfit Hanesbrands Inc. (HBI). The Winston-Salem firm, whose other barely-there labels include Leggs, Playtex, Champion, and Wonderbra, surged 6.35% after reporting strong first quarter growth. They also issued upbeat forward guidance, and now expects full year 2011 earnings to come in conceivably as high as $2.90 per share -- some $0.19 ahead of what consensus was calling for. Hanesbrands, which was once part of Sara Lee (SLE), posted an 11.7% increase in Q1 sales, helped by its acquisition of Gear For Sports. Outerwear (+37%) and international (+24%) were highlights, although a 7% slump in hosiery was disappointing. Peter Cottontail could also cause problems as we approach Easter; costs as a percentage of sales were up by 110 basis points in 12 months, with cotton's 60% surge accounting for much of the increase in textile prices. Still, Sterne Agee analyst Kenneth Stumphauzer said, "By delivering the right quality product to retailers and backing it up by significant marketing dollars, the company increasingly opened more avenues for sales." The Haines bottom occurred over two years ago, but Hanesbrands is on top of the world today.

Turn to Could Cotton Cause a Crisis? for more.

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No positions in stocks mentioned.
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