HON: Breakup Phase Will Unlock Upside As Quantinuum Monetization Approaches

Honeywell International's fair value estimate was reduced by analysts from $245.60 to $241.67 per share. This change reflects updates to financial models and sum-of-the-parts analysis following Q3 results and the recent Solstice spin-off.

Analyst Commentary

Following Honeywell International’s Q3 results and the Solstice spin-off, analysts have updated models and targets, offering a range of perspectives on the company’s valuation, execution outlook, and future growth drivers.

Bullish Takeaways

• Bullish analysts highlight Honeywell’s entry into what they describe as a “breakup catalyst-rich phase,” citing recent strategic actions that are expected to unlock additional value for shareholders and improve visibility on execution.
• Momentum is reportedly building across the company’s core industrial and technology segments. This is seen as supporting higher long-term growth opportunities and stronger operational performance.
• The improved sum-of-the-parts valuation, considering recent asset moves and balance sheet enhancements, is viewed as offering attractive upside compared to current levels.
• Honeywell’s majority stake in Quantinuum could add an estimated $7 per share in value, with external fundraising events affirming a rising valuation for this business and providing a potential future monetization path.

Bearish Takeaways

• Bearish analysts have trimmed their price targets, reflecting updated models and a careful reassessment of earnings power following the spin-off of Solstice.
• There is some caution around the transition period after the spin-off, particularly regarding guidance updates and the need to adjust for two fewer months of Solstice contribution in reported results.
• While growth remains broadly on track, some analysts maintain a more reserved outlook and neutral ratings as they await further corporate actions or evidence of sustained margin improvement.
• Risks related to the timeline of monetizing stakes in high-growth subsidiaries, such as Quantinuum, are noted, with IPOs potentially being pushed further out than previously expected.

What's in the News

• Honeywell announced a collaboration with TotalEnergies to pilot its AI-assisted Experion Operations Assistant at the Port Arthur Refinery. The solution successfully forecasted maintenance events in advance and reduced downtime and emissions (Strategic Alliances).
• Honeywell introduced a breakthrough technology to convert agricultural and forestry waste into renewable marine fuel, gasoline, and sustainable aviation fuel, helping hard-to-abate sectors reduce carbon emissions (Product-Related Announcements).
• The company completed a share repurchase tranche by buying back 457,376 shares for $100 million, bringing total repurchases under the current program to over 40 million shares (Buyback Tranche Update).
• Honeywell updated its earnings guidance for 2025, lowering expected sales and earnings per share ranges (Corporate Guidance: Lowered).
• The Board of Directors approved an increase in the annual cash dividend from $4.52 to $4.76 per share, effective with the fourth-quarter payment (Dividend Increases).

Valuation Changes

• Fair Value Estimate has decreased modestly from $245.60 to $241.67 per share, reflecting updated valuation models.
• Discount Rate has risen slightly from 7.99% to 8.02%, indicating a higher required rate of return for investors.
• Revenue Growth Forecast has increased marginally from 2.67% to 2.71%, suggesting a slightly stronger outlook for sales expansion.
• Net Profit Margin Estimate has improved from 15.28% to 16.35%, highlighting expectations for higher profitability.
• Future Price/Earnings Ratio has fallen from 27.14x to 24.98x, signaling a more conservative profit valuation for the company's future earnings.