Textron (TXT) is showing a credible step to unlocking value from separating its Industrial segment to become a cleaner aerospace and defense firm, Morgan Stanley said in a note Monday.

"We see the planned separation as a step toward unlocking value, but key uncertainties remain around structure, timing, and ultimate value realization," the report said.

The note also said it is shifting to a sum-of-the-parts valuation to better capture segment value as TXT transitions toward a more focused A&D portfolio.

"We believe Systems is underappreciated today, and the key debate is whether TXT can earn credit for its unmanned and defense tech exposure," the note added.

Morgan Stanley increased its price target to $109 from $92 while keeping its equal weight rating, citing a balanced risk reward.

Price: 92.03, Change: -2.69, Percent Change: -2.84