Honeywell Aerospace Inc (HONA)

Conclusion

Honeywell Aerospace Inc supplies mission-critical systems for aerospace and defense platforms through three segments: Electronic Solutions, Engines & Power Systems, and Control Systems. On 2026-11-06 the share closed at 152.92 USD, giving a market capitalisation of 48.5 billion USD and an enterprise value of 62.8 billion USD.

The verdict is fair. The shares trade at a P/E of 25.5, an EV/EBITDA of 16.2 and a price to free cash flow of 21.1. Ten-year medians for these multiples are not available, so they cannot be set against the company's own history. The discounted cash flow gives 163.02 USD per share at a discount rate of 9.87%. The fair value band runs from 130.42 to 195.63 USD, with a midpoint of 163.02 USD and a margin of safety of 6.6% at the current price. The reverse DCF implies growth of 8.85% a year. Analysts currently expect earnings growth of 12.2% next year. Revenue grew in both comparable years, but longer-term growth rates are not available.

What holds the case up is a return on invested capital of 23.1% against a weighted average cost of capital of 8.4%, a gap of 14.6 percentage points, and free cash flow of 120.9% of net income on a trailing basis. What would break it is leverage: net debt to EBITDA of 3.69x and interest coverage of 4.29x. Estimate revisions have also turned negative. Next-year estimates have fallen 11.3% over 90 days, with five downgrades and two upgrades in the last 30 days.

Financial health

Financial strength is yellow: the current ratio of 1.64 is good, but net debt to EBITDA of 3.69x, interest coverage of 4.29x and the Altman Z-score of 2.54 are neutral. The quick ratio is 0.84 and debt to equity is not available. The Altman model was designed for manufacturers. The Z-score of 2.54 sits in the grey zone, which the model reads as neither clearly safe nor distressed. Insolvency risk: low, about 0.26% by the estimate of the Ohlson model over one to two years. The company is not in distress by this measure, but the leverage ratios leave limited room for a downturn in earnings.

Earnings quality

Earnings quality is grey, because there is not enough data to score all signals. Free cash flow conversion of 120.9% on a trailing basis is good, and free cash flow after stock-based compensation is 2.19 billion USD. Stock-based compensation is 0.6% of revenue. The accrual ratio is -0.11, which points to cash earnings running ahead of reported earnings. The Piotroski score is 5 out of 8 evaluable tests. The Beneish M-score is not available. Five-year free cash flow conversion and the five-year change in share count are not available. Only two quarters of earnings surprises are on record: one beat and one miss, with an average surprise of 3.3%.

Profitability

Profitability is green. The operating margin of 18.95% is good, but below its ten-year median of 22.72%. The net margin of 10.35% is good, against a median of 18.24%. The gross margin of 36.1% is slightly above its median of 35.6%. The return on invested capital of 23.1% stands well above the cost of capital of 8.4%, and its five-year median is 29.9%. The DuPont split shows a net margin of 10.2%, an asset turnover of 0.98 and an equity multiplier of 2.11. Because leverage lifts the return on equity, the return on invested capital is the more reliable measure here. Margin stability is not available.

Growth

Growth is grey, because there is not enough data to compute the growth rates. Revenue grew in both comparable years. Compound growth over three, five and ten years, and the growth in earnings per share, are not available. The only forward-looking figure is the analysts' expectation of 12.2% earnings growth for next year, which is good on the scorecard. That estimate has been revised down over the past 90 days, so the outlook for the coming year is less certain than the single number suggests.

Valuation

Valuation is yellow, because the verdict is fair and the margin of safety of 6.6% is neutral. The current multiples are a P/E of 25.5, an EV/EBITDA of 16.2, a price to free cash flow of 21.1 and a price to sales of 2.6. The earnings yield is 3.9% and the free cash flow yield is 4.7%. Ten-year medians and any premium or discount to them are not available. The discounted cash flow gives 163.02 USD per share, using a discount rate of 9.87%, first-stage growth of 12.17% and terminal growth of 2.5%. The terminal value accounts for 55.4% of that figure. The reverse DCF implies growth of 8.85%. The fair value from historical multiples is not available. The fair value is an order-of-magnitude estimate built on fixed assumptions, not a price target. The company pays no dividend.

Risks

Net debt to EBITDA of 3.69x means that a fall in EBITDA would raise leverage quickly, and interest coverage of 4.29x leaves a narrower buffer against higher interest costs. Negative estimate revisions suggest that the near-term earnings outlook could weaken further. A Piotroski score of 5 out of 8 and the limited history of earnings surprises give a thin basis for judging earnings quality. Several values are not available: debt to equity, the return on equity, the Beneish M-score, the historical fair value, ten-year medians, and beta. The company does not report its beta, so the discount rate rests on the fixed assumptions. This analysis has further limits: it has no debt maturity schedule and no revenue breakdown by segment.