Darn it, one of my favorite companies, United Technologies (UTX) , truly caused this last down leg by announcing that it had to cut its jet engine deliveries because of production problems.
This is a very big deal because this engine, the geared turbofan, is crucial to United Technologies beating expectations. The company had hoped to make 200 engines but the learning curve, as the CEO, Greg Hayes, told analysts, the learning curve is a difficult one.
Why did this negative news have such an impact on the market? Simple: people are skeptical about everything in aerospace these days and I am sure some believe that it's demand, not supply, that's really driving the new forecast.
I think that's nonsense. Having studied the engine and realizing how breakthrough it is -- saving as much as 15% in energy costs, the biggest variable for an airliner -- there's tons of demand.
But this is a tough blow.
The stock has now given up all of the excess gains it had in addition to those that were tacked on when Honeywell (HON) sought to acquire the company. It's coming back to earth.
I suspect a slew of number cuts on Monday. Maybe after the smoke clears it's a buy but those of us who have lived through the difficulties of making planes over time, know that this is rarely a one quarter phenomena.
At Action Alerts PLUS we remain committed to Alcoa (AA) which has a very huge aircraft component to it. I believe Greg when he says it's supply and we will use genuine weakness to buy more Alcoa if it comes in.
