Is Now the Right Moment to Reassess Honeywell After the Announced Three-Way Split in 2025?

If you’ve been keeping an eye on Honeywell International lately, you’re probably wrestling with that classic investor’s dilemma: “Am I looking at a bargain or a value trap?” It’s a familiar crossroads, and the recent share price action is only adding to the intrigue. While Honeywell finished its latest session at $208.19, the stock has dipped 7.7% year-to-date and fallen 5.9% over the past month. Still, zoom out and you’ll spot bright spots. A five-year gain of 39.0% and a three-year return of 32.9% hint at enduring strength that’s kept long-term holders satisfied. Even the 2.4% uptick over the past year beats a flatline.

Behind these numbers are broader market shifts, especially as investors rethink what’s risky and what’s not in an environment shaped by changing industrial demand and global supply chain headlines. Honeywell’s price has swayed with evolving expectations about global growth and the push for advanced technologies in automation and aerospace. With that in mind, how does Honeywell’s valuation stack up today? Out of six major valuation checks, the company scores a 3, undervalued on half of them. This is a solid showing for a giant like this.

Let’s break down those valuation approaches next and see what they really reveal about Honeywell’s potential. And if you stick around until the end, I’ll share an even smarter way to frame your investment decision.

Why Honeywell International is lagging behind its peers

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

A Discounted Cash Flow (DCF) model estimates a company’s intrinsic value by projecting its future cash flows and discounting them back to today’s dollars. For Honeywell International, this means using forecasts of its Free Cash Flow (FCF), which is the money left after operating expenses and capital investments, to determine what the business is really worth right now.

Currently, Honeywell’s Free Cash Flow stands at approximately $5.07 billion. Analyst consensus predicts annual FCF will keep growing, reaching about $7.33 billion by 2029. It is worth noting that projections beyond five years are based on reasonable extrapolation rather than direct analyst estimates, but the trend points to solid expansion over the next decade.

The DCF model values Honeywell at an intrinsic fair value of $204.87 per share, which is just 1.6% below the current stock price of $208.19. This suggests that, based on cash flow projections, the stock is trading a bit above its fundamental value, but the gap is slim.

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

For profitable companies like Honeywell International, the Price-to-Earnings (PE) ratio is a go-to yardstick. This metric helps investors evaluate how much they are paying for each dollar of current earnings, making it a time-tested way to judge value when a business has stable, predictable profits.

However, what is considered a “normal” PE ratio can vary. Higher expected growth or lower perceived risk typically warrants a higher multiple, since investors are willing to pay more for faster expansion or greater safety. Conversely, slower growth or more uncertainty tends to pull the multiple down.

Right now, Honeywell trades at a PE ratio of 23.1x. This is well above the Industrials sector average of 12.8x, but a bit lower than peers averaging 27.0x. The market is pricing Honeywell as a quality name, but not at the very top end of the peer group.

This is where Simply Wall St’s “Fair Ratio” comes in. The Fair Ratio (28.2x for Honeywell) is designed to reflect a more tailored view, adjusting for factors like expected earnings growth, business risks, profit margins, industry norms, and the company’s sizable market cap. Unlike generic industry or peer averages, this figure aims to be a more precise marker of what Honeywell should reasonably command in the market.

Comparing the Fair Ratio to the current PE, Honeywell’s actual valuation comes in just below the custom Fair Ratio benchmark. With a difference of about 5x, this suggests the stock is modestly undervalued relative to its outlook and risk profile.

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's introduce you to Narratives. A Narrative is simply your story about Honeywell International, connecting your own assumptions about its future revenue, earnings, and margins to a calculated fair value. Instead of just crunching numbers, Narratives help you articulate your unique perspective through a transparent financial forecast, so your expectations about the company's strategy or risks are directly reflected in the fair value you use for decisions. Narratives on Simply Wall St’s Community page make this approach easy and accessible. Millions of investors are already using them to track how the market’s story changes in real time.

With Narratives, you can quickly see if Honeywell’s price offers opportunity or caution by comparing your fair value estimate with the current share price, and your Narrative even updates dynamically as fresh news and earnings data are released. For example, one investor might see Honeywell’s separation into three companies unlocking new value for a $290 fair value, while another sees margin pressure keeping value closer to $203. Both perspectives are captured as actionable Narratives.

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

Undervalued by approximately 17.7%

Revenue Growth Assumption: 4.6%

• The separation into three companies and targeted acquisitions are expected to unlock long-term growth and improve revenue and margins for each entity.
• Expansion into high-potential verticals like LNG and data centers, along with a focus on operational efficiencies and share buybacks, is seen as driving enhanced earnings per share.
• Main risks relate to global economic uncertainty, cost pressures from executing the break-up, and vulnerabilities in demand. However, analyst consensus targets a meaningful upside from current prices if growth materializes.

🐻 Honeywell International Bear Case

Fair Value: $203.00

Overvalued by approximately 2.6%

Revenue Growth Assumption: 3.7%

• Trade tariffs, shifting global demand, and near-term execution costs from the separation pose risks to revenues and margins across all segments.
• The separation into three companies introduces significant one-time costs and adds near-term earnings pressure, potentially offsetting the intended benefits.
• Despite ongoing buybacks and acquisitions, analysts who take a more cautious view believe that future market expectations may still be too high compared to underlying business improvements.

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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