With the abrupt departure of UTX’s CEO yesterday after 22 years in charge and replacement with the CFO as well as subsequent analyst upgrades, we look to OTAS to see what effect this will have on the stock.
The stock outperformed the industry group and market yesterday on high volume post the news and analyst upgrades and is now retracing from the lows vs. the industry group. Additionally, the options market is pricing in potentially bullish positioning as both the Downside Skew and the Put Ratio have decreased, implying investors are paying less for downside protection and transacting less in puts and more in calls. UTX had high options volume yesterday as well and we can see in the Top Ten Traded Volume that there was heavy activity in the FEB15 and JAN15 out of the money calls. Valuations are also at very inexpensive levels relative to the industry group, a discount to the industry and back at a multi-year low.
The options market, while flagging as high implied vol vs. the industry group, shows bullish positioning as investors are removing risk by placing less downside bets:
Despite the recent price rise, the valuations are still flagging as attractive relative to the industry group; at 8.3x 12M Fwd EV/EBITDA, this is a 7% discount and a multi-year low: