United Technologies (UTX -1.2%) is downgraded to Market Perform from Outperform at Cowen, which cites UTX's "hefty" deal price for Rockwell Collins (COL) and increased debt load following the proposed acquisition.
Tuesday's 6% selloff "may have been an overreaction; but the stock looks like 'dead money' at least until the COL deal is completed," writes Cowen analyst Cai von Rumohr.
The proposed deal for COL is "a great strategic fit," according to von Rumohr. "It gives [UTX] complementary products, especially avionics and IMS, to maximize potential for digital applications," but the deal price, including debt, implies a 15.4x multiple vs. COL's pro-forma EBITDA for 2017.
Cowen cuts its UTX stock price target to $120 from $127, still representing 8% upside from yesterday's close.
UTX is adding to yesterday's losses in early trade, while COL has barely moved and remains well short of the deal price as investors appear skeptical that the deal will pass government scrutiny.
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