Why Honeywell International is back in focus after its aerospace spin off

Honeywell International (HON) is drawing fresh attention after its former aerospace business, now independent, reported weaker than expected first standalone earnings and cut its sales growth outlook, alongside a sharp year to date share price decline.

The latest aerospace spin off results have come at a time when Honeywell International’s share price has fallen about 38.6% year to date, even though the 1 year total shareholder return is 15%. This points to fading recent momentum after stronger longer term gains.

If you are reassessing Honeywell International after the aerospace separation, it can help to see what else is moving in adjacent themes and technologies through the 36 robotics and automation stocks

After that kind of reset in Honeywell International’s share price, and with a fair value picture that ranges from its own intrinsic model to a higher analyst target, the real issue now is where you anchor your valuation range.

Most Popular Narrative: 24.8% Undervalued

According to the most followed narrative on Honeywell International, the fair value of $320.19 sits well above the last close at $240.74. That gap reflects a view that the separated automation, building and energy businesses justify a higher valuation than the current market price suggests.

HON RemainCo is a pure-play industrial automation and energy technology compounder with a confirmed June 29 catalyst, $19B+ in contracted backlog, a sold-out LNG order book, a global SAF technology licensing position, a recurring revenue platform transition underway via Forge, and an embedded position on both sides of the energy transition, all trading at a conglomerate discount that disappears in 53 days.

Want to see how a single fair value brings together backlog, margins and future earnings power for Honeywell International? The narrative knits automation, energy technology and software into one pricing story, built on specific margin and growth assumptions that are not obvious from the headline multiples.

Result: Fair Value of $320.19 (UNDERVALUED)

However, Honeywell International’s annual revenue and net income both declined, and the recent share price fall could limit how quickly any re rating narrative gains traction.

Another View on Honeywell International’s valuation

The user narrative argues Honeywell International is 24.8% undervalued at $320.19 fair value, yet our DCF model points the other way. At $240.74, the stock trades above an SWS DCF fair value of $159.44, which suggests overvaluation instead. Which set of assumptions do you find more realistic for the next few years?

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Honeywell International for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 49 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

If the mix of optimism and caution around Honeywell International feels finely balanced, you may want to act quickly and weigh the data for yourself using the 3 key rewards and 4 important warning signs.

Looking for more investment ideas beyond Honeywell International?

If you like the detail behind Honeywell International, it can be useful to widen your watchlist with other clear ideas filtered by quality, value and resilience.

• Spot potential higher yield opportunities by reviewing companies that show up as 8 dividend fortresses.
• Look for potential mispriced opportunities by scanning our 49 high quality undervalued stocks.
• Strengthen your watchlist with financially robust candidates filtered through the solid balance sheet and fundamentals stocks screener (49 results).

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.