Evaluating Honeywell Stock After Announcing Plan to Split Into Three Companies

Deciding what to do with Honeywell International stock these days feels a bit like weighing a sturdy classic against the latest trends. Are you looking for resilience, or hoping for a breakout? Recent price moves have mostly kept investors on their toes. In the past year, Honeywell’s stock fell by 5.5%, and although it is down roughly 10% for the year so far, it is worth noting the bigger picture. Over the past three and five years, the stock is actually up by 21.9% and 27.1% respectively, signaling that long-term holders have enjoyed decent returns despite some recent softness.

There has been increased attention on industrials as the global economy continues to recalibrate after supply chain shocks and shifting demand patterns. While Honeywell has a reputation for weathering market swings, even reliable stocks face changing perceptions of risk and reward. You may have noticed that big moves in supply chain modernization and energy transitions have started to factor into Honeywell’s story. All this means the market is rethinking just how much Honeywell should be worth.

That is where the numbers start to get interesting. On a scale that adds up points for each time a company appears undervalued by various metrics, Honeywell scores a solid 4 out of 6, which is a strong signal for those watching valuation closely. So, is this a case of a good company trading at a good price, or does it have more room to run?

Let us break down what the different valuation approaches are telling us about Honeywell right now, and stick around because there is a smarter, more comprehensive way to think about valuation that we will explore at the end.

Why Honeywell International is lagging behind its peers

Approach 1: Honeywell International Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company’s value by projecting its future cash flows and discounting them back to today’s value. For Honeywell International, this method provides a clear view of the company’s long-term financial picture based on expected profitability and cash generation.

Currently, Honeywell’s last twelve months of free cash flow stands at approximately $5.07 Billion. Analysts forecast a steady growth path, with projected free cash flow rising to $7.33 Billion by 2029. While analysts directly estimate up to the next five years, further growth projections are extrapolated to illustrate continued expansion based on current trends and expert forecasts.

Applying the DCF approach using these cash flow projections, the estimated intrinsic value for Honeywell comes out to $203.78 per share. Compared to its latest share price, this suggests the stock is about 0.3% undervalued and essentially aligns market expectations with fundamental value.

Result: ABOUT RIGHT

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Honeywell International.

Simply Wall St performs a valuation analysis on every stock in the world every day (check out Honeywell International's valuation analysis). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes.

Approach 2: Honeywell International Price vs Earnings (PE)

The price-to-earnings (PE) ratio is one of the most popular ways to value profitable companies, because it puts a company’s share price in context with its actual earnings. A higher PE can reflect expectations for stronger future growth or a lower perceived risk, while a lower PE may indicate slower expected growth or higher risks. This makes the metric a straightforward way to gauge if a company like Honeywell is attractively valued relative to its performance and potential.

Currently, Honeywell trades at a PE ratio of 22.6x. This is well above the wider industrials sector average of 13.0x, but it is below the peer group average of 27.2x. Simply Wall St’s proprietary Fair Ratio for Honeywell is calculated at 28.8x. The Fair Ratio goes beyond generic industry or peer comparisons by factoring in elements such as Honeywell’s expected earnings growth, profit margins, business risks, industry position, and market capitalization, providing a more tailored ‘true value’ multiple for the company.

By using this more holistic benchmark, investors can avoid the pitfalls of surface-level comparisons and instead focus on what really drives fair valuation. At a current 22.6x versus a Fair Ratio of 28.8x, Honeywell appears undervalued on this measure.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Honeywell International Narrative

Earlier, we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a smarter, more dynamic approach to investing that goes beyond just the numbers. A Narrative gives you the power to connect your unique perspective on a company like Honeywell International to your financial forecast, forming a direct link between the company’s story, expectations for future revenue and profits, and your own fair value estimate.

Narratives are accessible and easy to use, available to millions of investors via the Simply Wall St Community page. Instead of seeing valuation as a static figure, Narratives help you weigh up whether the company is a buy, hold, or sell today by comparing your Fair Value estimate with the current market Price. They update dynamically whenever news, results, or key information changes.

For example, with Honeywell International, some investors see major upside from new automation and aerospace opportunities and forecast a fair value as high as $290.0 per share, while others, more cautious due to trade risks and restructuring costs, estimate fair value as low as $203.0. Both perspectives are captured through their individual Narratives.

With Narratives, you can tailor your investment view to reflect what you think will drive Honeywell’s future, making your decision process more insightful and informed.

For Honeywell International, we’ll make it really easy for you with previews of two leading Honeywell International Narratives:

• 🐂 Honeywell International Bull Case

  Fair Value: $252.97

  Current price is approximately 19.7% below this fair value.

  Forecasted annual revenue growth: 4.6%

  • Separation into three companies, strategic acquisitions, and growth in verticals like LNG and data centers are anticipated to unlock value and enhance margins.
  • Analyst consensus expects rising revenue, margin expansion, and steady share buybacks, contributing to robust earnings per share growth by 2028.
  • Risks include macroeconomic uncertainties, execution challenges from the separations, and exposure to global trade and geopolitical pressures.
• 🐻 Honeywell International Bear Case

  Fair Value: $203.00

  Current price is approximately 0.1% above this fair value.

  Forecasted annual revenue growth: 3.7%

  • Tariffs, changing global demand, and company separation are expected to increase near-term costs and keep earnings under pressure.
  • Outlook assumes more modest revenue and margin expansion, with 2028 targets reflecting a cautious stance on valuation and growth sustainability.
  • Possible offsetting factors include ongoing share buybacks, tariff mitigation efforts, and strategic acquisitions, but bearish analysts believe the market price is currently too high.

Do you think there's more to the story for Honeywell International? Create your own Narrative to let the Community know!

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.

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