William Blair & Company Analyst Nick Heymann says many companies in the industrial sector are looking for acquisitions, but that that valuations in most industrial markets make them prohibitively expensive. However, one company that may be well-positioned to make a purchase is United Technologies Corporation (UTX), Heymann says.
“Evaluating all this portfolio change, United Technologies is likely going to spin out Sikorsky, and that should certainly free up some cash for them that may be used to fund further share repurchases and possibly also be used for acquisitions,” Heymann says.
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Using acquisitions to supplement flat to slight negative underlying organic growth is not a viable option for most industrial companies at this point, Heymann says. But, he says there are some other exceptions in addition to United Technologies.
“We do think that there are opportunities for certain companies to globalize their product base outside the U.S. where the penetration is low, like we mentioned with Graco or Wabtec,” Heymann says. “Dover certainly is seeing that with regards to their energy and refrigeration and food equipment businesses, as well as their engineered products and particularly their commercial printing business.”
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