Jim Cramer: Why I like the proposed merger between United Technologies and Raytheon

United Technologies (UTX) stock is gaining even more value with its Raytheon (RTN) merger project.

Indeed, if the agreement can be reached with the antitrust regulators of the United States Department of Justice, you will have a much more valuable activity in the aerospace and defense arenas than that the current split plan of United Technologies would give you. And if the agreement does not succeed (which is certainly possible given the merger of two of the country's largest defense contractors), the UTX stock will return to a price higher than what it should be at Monday's opening.

I like UTX a lot, but I think the break plan will create a lot of extra value. The company's climate control activities have great prospects and their performance is at an unprecedented level. However, the activity of Otis lifts / Escalators from United Tech is more problematic. Much of its growth comes from China, but Otis has been in the sights of China since the beginning of the US-China trade war.

Thus, a merger between UTX and Raytheon would give aerospace and defense companies even more weight – and less exposure to the US defense budget problems. This is important because the Raytheon stock is stuck for so long a long time, it is the belief that defense spending peaked during this cycle.

In fact, Raytheon had a series of problematic shifts. The company has repeatedly exceeded analysts' expectations, but has not raised its expectations in a way that satisfies Wall Street. We fought this negativity for several quarters at ActionAlertsPlus.com and then gave up.

One of the reasons we gave up was that we did not think anyone could ever buy Raytheon without causing antitrust problems. Yes, the merger of Harris (HRS) and L3 Technologies (LLL) has been successful, but these are much smaller companies. This combination still shows you the potential benefits of the partnership between Raytheon and United Technologies.