Valuation Scorecard: Stock Rating D-Negative (3/7/24)-Honeywell International Inc (HON).

As reflected at the current price of $203, what future Honeywell International operating performance is the market anticipating? To achieve average annual stock market performance of 9.0% over the next 6 years, Honeywell International shares will need to reach $340. To achieve Upper quartile performance, Honeywell International’s stock price will need to reach $400 by 2029.

Executive Summary

• Price Target Research identifies Honeywell International as having: very high profitability, above average financial strength, instability, and very low expected growth. A big positive influence on Honeywell International’s valuation is its superior Profitability.
• High valuation, below market shareholder returns. Current valuation levels are high relative to the Honeywell International Peer Group. Recent market returns have underperformed the Honeywell International Peer Group. Total shareholder returns expected to significantly lag the overall equity market. Based on current investor expectations, Honeywell International shares should reach a level of $93 by 2029 — an -9.2% per year total shareholder return. A 2029 stock price of $340 would reflect median performance and a price of $400 would be required to reach upper quartile performance.
• Honeywell International’s past growth is average. Historical growth has been average relative to the Honeywell International Peer Group and forecasted growth is relatively very low. Asset Growth has lagged. This factor has negatively affected market perceptions of Honeywell International. Honeywell International’s historical income statement growth and balance sheet growth have diverged. Revenue growth has paralleled asset growth; earnings growth has exceeded equity growth resulting in an improving return on equity. Honeywell International’s consensus growth expectations are lower than historical growth.
• Profitability has been Honeywell International’s biggest valuation strength. Pretax ROA, and Return on Equity are group leading. These factors have strengthened market perceptions of Honeywell International. The company has normal cash needs.
• Honeywell International’s risk profile is favorable. Overall variability has been relatively low with relatively low revenue variability, above average E.P.S. variability, Financial Strength is only average and earnings’ expectations are relatively high. The debt/capital ratio has been relatively steady.

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