United Technologies' stock gains after Cowen upgrades on 'win-win' scenario from Raytheon merger

Shares of United Technologies Corp. hiked up 1.1% in premarket trading Monday, after the building systems and aerospace company was upgraded by analyst Cai von Rumohr at Cowen, who said the stock's selloff since the proposed merger with Raytheon Co. was announced offers a "win win" for attractive standalone valuation. He raised his rating to outperform, after being at market perform since September 2017, and increased his stock price target to $150 from $135. Since the merger was announced, United Technologies' stock has lost 2.6% through Friday while the Dow Jones Industrial Average has gained 2.8%. The company's aerospace unit is at "an attractive inflection point," von Rumohr wrote in a note to clients, and said the stock's relative weakness since the merger was announced suggests investors don't understand the benefits. He said if the merger fails, he believes the stock should move closer to its sum-of-the-parts value of $150 to $155, and if the merger goes through, United Technologies gets the synergy benefits plus greater cash flow per share from enhanced financial flexibility. Von Rumohr added he sees "modest" merger completion risk.

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