United Technologies jumps after RBC upgrades stock

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An attendee looks at an aircraft engine from Pratt & Whitney, a unit of United Technologies, on display during the China International Aviation & Aerospace Exhibition in Zhuhai, China.

United Technologies shares rose nearly 1.5 percent after RBC Capital Markets upgraded the industrial giant and Dow Jones industrial average member.

RBC Capital Markets upgraded the stock to outperform from sector perform Wednesday, arguing that recent underperformance is likely to subside and shares could pop 25 percent this year.

“We view United Technologies as a high quality supplier of critical components in both industrial and aero markets with large installed bases or products with a high cost of failure, driving recurring and predictable high-margin aftermarket sales,” wrote RBC analyst Matthew McConnell in a note.

Shares of United Technologies rose more than 1 percent in premarket trading following the call. Shares of the jet-engine maker have underperformed the market over the past 12 months, up 16 percent versus the S&P 500’s 19 percent climb.

The analyst raised his price target on the company to $160 from $124, representing 25 percent upside from Tuesday’s close. McConnell noted that while investments in company segments such as Pratt and Otis have hampered performance recently, the company’s patience is about to pay off.

Separately, RBC downgraded shares of United Technologies competitor Honeywell on Wednesday.

The industry leader made headlines in September after agreeing to buy aircraft parts manufacturer Rockwell Collins for $30 billion. Under the deal, the companies said the Rockwell Collins and United Technologies’s aerospace systems segments will be combined to create a new business unit named Collins Aerospace Systems.