HON: Multiple Upcoming Breakup Events Will Unlock Value in Core Business

Honeywell International's analyst fair value target was revised down from $248.54 to $245.60. Analysts cite factors including slower expected revenue growth and profit margins after the Solstice spin-off, as well as updated sum-of-the-parts evaluations.

Analyst Commentary

Recent analyst research provides a range of perspectives on Honeywell International’s outlook following the Solstice spin-off and subsequent updates to forecasts and valuation approaches.

• Bullish analysts highlight strong momentum across Honeywell’s core business segments, with improved execution and operational visibility.
• Expectations for a catalyst-rich period ahead suggest Honeywell is entering a phase with multiple potential value-unlocking events after the corporate breakup.
• Sum-of-the-parts valuations indicate attractive upside potential, particularly with the new portfolio composition and capital infusions from the Quantinuum fundraise.
• Recent results are viewed as solid, supporting positive revisions to price targets and upward rating moves by some research firms.

• Bearish analysts express caution about slower revenue growth and compressed profit margins following the spinoff, which could weigh on valuation multiples.
• Revised sum-of-the-parts analyses factor in the removal of Solstice, reducing total estimated value and contributing to lower fair value targets.
• Uncertainty remains around the timing and execution of planned monetization events, especially with Quantinuum, now expected to take longer than previously anticipated.
• Adjustments to forecasts to account for structural business changes and payment transfers have contributed to more reserved outlooks.

What's in the News

• Honeywell and other backers of Quantinuum are considering raising hundreds of millions of dollars at a $10 billion valuation for the quantum computing company, with Nvidia among potential investors (Bloomberg).
• MarketWatch speculates Honeywell as a contender for the "mystery stock" in Berkshire Hathaway’s next large industrial investment, along with Caterpillar and Deere (MarketWatch).
• Honeywell filed for the planned spin-off of Solstice Advanced Materials, which is expected to be tax-free for shareholders and listed under the ticker symbol "SOLS" (SEC Filing).
• The company introduced breakthrough technology that converts agricultural and forestry waste into renewable fuels for sectors such as maritime and aviation, supporting decarbonization efforts.

Valuation Changes

• Consensus Analyst Price Target: Decreased from $248.54 to $245.60, reflecting a modest adjustment downward in overall valuation estimates.
• Discount Rate: Risen slightly from 7.90% to 7.99%, indicating a marginal increase in the risk premium applied to Honeywell's future cash flows.
• Revenue Growth: Lowered significantly from 4.18% to 2.67%, highlighting reduced expectations for top-line expansion following recent restructuring.
• Net Profit Margin: Declined from 16.47% to 15.28%, pointing to expectations of modestly compressed profitability after the spin-off.
• Future P/E: Increased from 24.4x to 27.1x, suggesting a higher valuation relative to earnings expectations despite more conservative growth forecasts.