December 10, 2014 / 8:10 PM / in 3 years

New United Tech CEO to take stage amid Wall Street break-up talk

(Reuters) - The change atop United Technologies Corp (UTX.N) has set off speculation the U.S. conglomerate may eventually shake up its diverse industrial businesses, including possibly divesting its Sikorsky helicopter unit.

Shares of United Technologies have climbed 4 percent since the company announced on Nov. 24 that Chief Financial Officer Greg Hayes replaced Louis Chenevert, who retired as chief executive officer, effective immediately.

The stock performance eclipsed a slight decline in the S&P 500 index .SPX over that period, with investors saying Hayes could move to boost the stock, including taking a closer look at the structure of the company, which also makes Pratt & Whitney jet engines and Otis elevators.

Well-known to Wall Street after serving as CFO for six years, Hayes will make his public debut as CEO on Thursday, when United Technologies details its 2015 financial outlook to investors and analysts at a meeting in New York.

"My sense is that investors believe that a more engaged CEO will be more inclined to execute value-creating transactions, including the possible divestiture of Sikorsky," said Keith Davis, principal at investment management firm Farr, Miller & Washington, which holds about 200,000 United Tech shares.

While Hayes is not expected to announce specific moves, given that he just took the reins, Wall Street will look for signs he is open to change.

"I think Hayes will indicate everything is under review, he’s not going to say what," said Scott Lawson, vice president of investment management firm Westwood Holdings Group, which owns about 900,000 shares. "As an investor one would want him to be proactive in making sure UTX has the best portfolio possible."

United Tech shares have lagged those of Honeywell International Inc (HON.N) this year amid concerns about profit growth in 2015, and trade at a 3 percent discount to its rival on a forward price-to-earnings ratio basis, according to Thomson Reuters data. United Tech shares were off nearly 1 percent to $113.90 on Wednesday.

One often-discussed option on Wall Street is the spinoff of Sikorsky, a major military contractor that makes Black Hawk helicopters. Credit Suisse analyst Julian Mitchell said this week that a Sikorsky disposal could help shares due in part to its margins, which are lower than those of other units.

Mitchell said another strategic move could be to merge Pratt & Whitney with the civil engine business of Rolls-Royce Holdings Plc (RR.L), while other analysts have floated the idea of splitting the company between its aerospace and commercial building businesses.

To be sure, some investors want to first understand Hayes' broader plan before seeking any shake-up.

"Until Greg Hayes explains what is his strategic vision for UTX, it is difficult for us to judge whether divestitures are a good thing or not," said Andrew Chan, assistant portfolio manager with Fiera Capital.

Reporting by Lewis Krauskopf; Editing by Jeffrey Benkoe

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