Honeywell International Inc (HON): what the price requires
At today's price, Honeywell International Inc (HON) is priced for +11.8% growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-13 · Source: https://boothcheck.com/report/HON
Headline
| Field | Value |
|---|---|
| Ticker | HON |
| Company | Honeywell International Inc |
| Current price | $221.67/sh |
| Composition | Commercial Aviation Original Equipment 7% / Commercial Aviation Aftermarket 21% / Defense and Space 19% / Sensing and Safety Technologies 3% / Productivity Solutions and Services 3% / Process Solutions 16% / Warehouse and Workflow Solutions 2% / Building Products 12% / Building Solutions 8% / UOP 8% / Corporate and All Other 0% |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | segment |
| Implied growth | 11.8% |
Solve inputs: computed at a 8% cost of capital with 5% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~9.5pp.
Reconcile: at the x-ray's 9.3% required return this reads ~22.7%/yr; the models below use their own rates.
How unusual the bet is: within-range
| Reference | Value |
|---|---|
| cohort percentile (of 225 peers) | 66 |
| sustained it ~5 years at this level | 51% |
| implied end-window share | 0% |
Valuation X-Ray
Every valuation family lands below the price. The price therefore requires assumptions beyond what those standard frames encode.
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 3.75x | 5 | expensive |
| Earnings | 5.47x | 4 | expensive |
| Relative | 1.38x | 3 | expensive |
| Growth | 1.41x | 3 | expensive |
Families that call it expensive: Asset, Earnings
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 7.5%); the inversion above states its own rate.
Per-Model Detail (n=15)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $125.98 | 1.76x | yes | FCF base $4.2B, growth 4% (input: historical growth), terminal g 3.6%, WACC 7.5%, 5yr projection |
| DCF Exit Multiple | Growth | $190.59 | 1.16x | yes | Exit EV/EBITDA: 15.9x / 17.9x / 19.9x (bear / base = today's held flat / bull), 5yr |
| Relative Valuation | Relative | $160.65 | 1.38x | yes | P/E 27.55x (blended: sector 22x + trailing (TTM) 41x), scenarios: 23.2x / 27.6x / 31.9x (bear / base = sector held flat / bull), EV/EBITDA 14x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $59.18 | 3.75x | yes | BV/sh $21.29, ROE (TTM) 25.7%, ke 9.3% |
| Two-Stage Excess Return | Asset | $99.50 | 2.23x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $157.19 | 1.41x | yes | Rev $39.7B, growth 4% (input: historical growth; tapered), Terminal P/S: 3.0x / 3.6x / 4.1x (bear / base = today's held flat / bull, cap 8x) |
| Growth-Adjusted P/E | Relative | — | — | no | — |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $114.88 | 1.93x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $8.45B × (1−10%) / WACC 7.5% → EPV (no growth) |
| Residual Income | Asset | $87.93 | 2.52x | yes | BV $21.29 + 5yr PV of (ROE (TTM) 25.7% − Kₑ 9.3%) × BV; BV grows 8.8%/yr |
| Graham Number | Asset | $51.19 | 4.33x | yes | √(22.5 × EPS $5.47 × BVPS $21.29) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $165.09 | 1.34x | yes | EBITDA $9.37B × sector EV/EBITDA 14.0x |
| FCF Yield | Earnings | $30.80 | 7.20x | yes | FCF $4203.0M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $27.55 | 8.05x | yes | SBC-adj FCF $4.01B (FCF $4.20B − SBC $0.19B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | $4.59 | 48.29x | yes | EPS $5.47 × (8.5 + 2×-5.0%) × (4.4 / 5.3%) (excluded from median) |
| ROIC-Justified P/B | Asset | $13.81 | 16.05x | yes | BV $21.29 × (ROIC 4.9% / WACC 7.5%) |
| P/Sales Sector | Relative | $124.25 | 1.78x | yes | Revenue $39.66B × sector P/S 2.0x |
| PEG Fair Value | Relative | — | — | no | — |
| Earnings Yield | Earnings | $59.15 | 3.75x | yes | EPS $5.47 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net debt | $24.4b |
| Net debt / NOPAT (after-tax) | 3.05x |
| Net debt / operating income (pre-tax) | 2.74x |
| Share count CAGR (buyback) | -3.4% |
| Burning cash | no |
Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.
Bullet Takeaways
- Honeywell is in the middle of taking itself apart: the Aerospace spin-off is on track for completion on June 29, with $20 billion of spin financing raised, alongside agreed sales of the Warehouse and Workflow Solutions and Productivity Solutions and Services businesses.
- The biggest risk is that the value the breakup is meant to unlock is already in the price; the stock is priced richer than every standard valuation frame supports, with Industrial Automation, the segment carrying the premium, sitting at the very top of its peer distribution.
- Watch the post-spin Honeywell against full-year guidance of 3% to 6% organic growth and adjusted EPS of $10.35 to $10.65; the first quarter showed 2% organic growth but strong 90 basis points of margin expansion to 23.3%.
Bull Case
What a single blended multiple misses about Honeywell today is that the company is deliberately ceasing to be one company. The Aerospace spin-off is set to complete on June 29, with $20 billion of spin financing raised and investment-grade ratings secured, and the company has also agreed to sell its Warehouse and Workflow Solutions business and its Productivity Solutions and Services unit. A conglomerate trades at a discount to the sum of its parts because no single peer group fits it; the breakup is the mechanism for collapsing that discount. The remaining Honeywell becomes a cleaner automation-and-energy story, and the separated Aerospace business gets valued against aerospace peers rather than buried in an industrial average.
The underlying businesses are executing well even before the structure changes. First-quarter sales of $9.1 billion grew 2% organically, but segment profit grew 6% and segment margin expanded 90 basis points to 23.3%, and adjusted EPS rose 11% to $2.45 on strong pricing across the portfolio. Margin expansion outrunning revenue growth is the signature of a disciplined operator pulling cost and pricing levers, and Honeywell's filing shows the granular portfolio work, including organic growth in Building Solutions and the Access Solutions acquisition becoming organic in its second year.
The balance sheet and cash generation give the transformation room. Interest is covered more than 23 times over, and management guides to free cash flow of $5.3 to $5.6 billion for the year against adjusted EPS guidance of $10.35 to $10.65, with the share count already shrinking about 2% annually. Aerospace is guided to high-single-digit organic sales growth, and the aftermarket installed base is a long-duration annuity that travels with the spun company. The bull case is a well-run set of franchises being unlocked from a conglomerate wrapper, with margin momentum and ample cash funding the transition.
Bear Case
The bear case begins with what is happening to the automation moat that once defined Honeywell. The company's industrial-automation and building businesses face a shifting competitive landscape, and the 10-K names the pressures directly: changes in the competitive landscape, including new market entrants and new technologies, and fluctuations in inventory levels in distribution channels. Short-cycle automation demand has been soft, dependent on a recovery in Europe and China that has not fully arrived, and the segment that the market is paying the steepest premium for, Industrial Automation, is the one whose end-market recovery is least in Honeywell's control. A moat built on incumbency in process and building controls erodes quietly as new entrants and digital-native competitors chip at the edges.
The valuation is where that erosion becomes an investment problem. No standard valuation family reaches the current price; the stock is rich on assets, earnings power, peers, and even forward growth. The price implies the Industrial Automation segment grows operating profit about 14.3% a year for five years, a multiple that sits at the very top of its peer distribution and that only about 46% of comparable fast-growers sustained for that long. Set that against first-quarter organic growth of just 2%, and the gap between what the price assumes and what the business is currently delivering is the heart of the bear case.
The breakup itself carries risk the optimists tend to wave away. Spinning Aerospace and selling two more businesses generates restructuring and separation charges that already depressed reported EPS, and a standalone Honeywell loaded with $20 billion of new spin financing and existing net debt near $24 billion will look more levered on a smaller revenue base. The filing flags supply-chain and demand disruptions across the segments, and a transformation of this scale invites execution risk, dis-synergies, stranded costs, and management attention diverted to deal mechanics. The bear case is not that the parts are bad; it is that the market has already priced the sum-of-the-parts upside, leaving the buyer exposed to soft short-cycle demand and the messy mechanics of getting there.
Valuation
Because Honeywell is a collection of businesses with different peer groups, the right way to read its price is segment by segment, and the inversion locates the premium precisely. The segment carrying the priced-in premium is Industrial Automation, and the price implies it grows operating profit about 14.3% a year for five years. That multiple sits at the very top of its peer distribution, well beyond the upper quartile, and only about 46% of comparable fast-growers sustained that pace for five years. The market is paying up for the automation franchise specifically, not for the company evenly.
The families of method all sit below the price, which is an unusual and important signal. None of them, asset value, earnings power, peer multiples, or even forward growth, reaches the current level. That pattern says the stock is priced for the breakup to deliver value that no single standard frame can capture: the bet is that splitting Aerospace out and shedding the lower-margin units re-rates the pieces above where the consolidated whole trades.
Solvency is sound but worth watching through the transformation. Interest is covered more than 23 times, and net debt near $24 billion runs about three times operating income, comfortable for a business of this quality. The complication is that the spin raised $20 billion of additional financing, and a smaller post-spin Honeywell carries its leverage against a reduced earnings base. The valuation question is therefore specific: the operating businesses are excellent and the margin trajectory is real, but at a price that exceeds every method, the upside rests on the breakup re-rating the parts, and the downside is a richly valued industrial with soft short-cycle demand if it does not.
Catalysts
The defining catalyst is structural and dated. Honeywell's Aerospace spin-off is on track to complete on June 29, with $20 billion of spin financing raised and investment-grade credit ratings secured, and the company is maintaining Aerospace guidance of high-single-digit organic sales growth for the year. Alongside the spin, Honeywell has agreed to sell its Warehouse and Workflow Solutions business and previously agreed to sell Productivity Solutions and Services, completing a portfolio transformation that reshapes what shareholders own.
The operating results frame the businesses heading into the split. Q1 2026 sales of $9.1 billion grew 2% organically, segment profit rose 6%, segment margin expanded 90 basis points to 23.3%, and adjusted EPS climbed 11% to $2.45, even as reported EPS fell on restructuring and separation items. Management maintained full-year guidance of 3% to 6% organic growth, segment margin of 22.7% to 23.1%, adjusted EPS of $10.35 to $10.65, and free cash flow of $5.3 to $5.6 billion. The key things to watch are the mechanics and market reception of the June 29 spin, whether short-cycle Industrial Automation demand recovers in Europe and China as management expects, and the first standalone results that show how the remaining Honeywell is valued once Aerospace is separate.
Peer Cohorts (Per Segment, With Filing Citations)
Aerospace Technologies (reported)
- RTX (RTX CORPORATION)
- (no filing in the citation store)
- GD (GENERAL DYNAMICS CORPORATION)
- (no filing in the citation store)
- NOC (NORTHROP GRUMMAN CORP /DE/)
- (no filing in the citation store)
- LMT (LOCKHEED MARTIN CORPORATION)
- (no filing in the citation store)
Industrial Automation (reported)
- ROK (Rockwell Automation, Inc.)
- (no filing in the citation store)
- PH (PARKER-HANNIFIN CORPORATION)
- (no filing in the citation store)
- FLS (FLOWSERVE CORP)
- (no filing in the citation store)
- XYL (Xylem Inc.)
- (no filing in the citation store)
- IEX (IDEX CORP)
- (no filing in the citation store)
- EMR (EMERSON ELECTRIC CO.)
- (no filing in the citation store)
- AME (AMETEK, Inc.)
- (no filing in the citation store)
- DOV (DOVER Corp)
- (no filing in the citation store)
Energy and Sustainability Solutions (reported)
- GE (GENERAL ELECTRIC COMPANY)
- (no filing in the citation store)
- MMM (3M COMPANY)
- (no filing in the citation store)
- ITW (ILLINOIS TOOL WORKS INC)
- (no filing in the citation store)
- ROP (ROPER TECHNOLOGIES INC)
- (no filing in the citation store)
Article Insight (Recent News Sentiment)
Sentiment score: 40.00 (MEDIUM confidence) FUD/Hype: FUD_DETECTED (The Blockonomi article highlights revenue misses and lowered guidance, directly linking performance to geopolitical instability, creating a negative sentiment.) Claim alignment: MIXED
These articles present a nuanced picture, with one focusing on a speculative future and the other on immediate operational headwinds.
Honeywell Cramer
- Scope: Discusses Jim Cramer’s positive view on Honeywell, particularly its quantum computing spin-off.
- Data: Cramer believes Honeywell’s Quantinuum spin-off will be the “best quantum play.”
- Verdict: Irrelevant to the core thesis; focuses on a tangential business unit.
Honeywell Blockonomi
- Scope: Reports on Honeywell’s Q1 2026 earnings miss and lowered guidance.
- Data: Q1 revenue was $9.14B versus an expected $9.3B, and Q2 EPS guidance is below consensus.
- Verdict: Challenges the thesis; confirms margin compression and revenue deceleration.
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.
Sources
Q1 2026 earnings call