Key Takeaways:
- Portfolio Transformation: Honeywell is spinning off Solstice Advanced Materials and Aerospace Technologies, simplifying into a pure-play automation company
- Price Projection: Based on current momentum, the stock could reach $242 by December 2027
- Potential Gains: This target implies a total return of 9.4% from the current price of $221
- Annual Return: Investors could see roughly 4.7% annual growth over the next 1.9 years
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Honeywell (HON) delivered its third consecutive quarter of guidance raises in Q3, posting 6% organic sales growth and beating earnings expectations. But CEO Vimal Kapur’s transformation goes deeper than quarterly numbers.
The company is executing an aggressive portfolio restructuring.
- Solstice Advanced Materials spun off on October 30, 2025, ahead of the original Q1 2026 target.
- Aerospace Technologies will follow in the second half of 2026.
- Orders surged 22% organically to $11.9 billion, the strongest growth in years.
This wasn’t driven by one mega-deal. Growth accelerated across all four segments with book-to-bill above 1x.
Aerospace returned to double-digit growth after supply chain challenges. Building Automation posted its fourth straight quarter of high single-digit growth, with data center demand accelerating.
Honeywell also cleaned up its balance sheet. It divested Bendix asbestos liability and terminated an indemnification agreement with Resideo in exchange for $1.6 billion in cash. These moves generated net cash inflow while reducing administrative burden.
Despite strong fundamentals, with anticipated free cash flow between $5.2-$5.6 billion, Honeywell stock trades at $221.
This creates an opportunity for investors who understand the company’s transition into a focused automation platform.
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What the Model Says for Honeywell Stock
We analyzed Honeywell through the lens of its transformation from a diversified conglomerate into three independent automation-focused companies.
The reorganization will create a clearer strategic focus. Building Automation continues as a leader in integrated building solutions.
Process Automation & Technology combines Honeywell Process Solutions with UOP’s process technology. Industrial Automation focuses on mission-critical products with proven reliability.
Management expects margin expansion in 2026 after a transitional 2025.
- Aerospace margins bottomed in Q2 at around 25% and are climbing back toward 26% and higher.
- The headwinds from tariff costs, CAES acquisition integration, and OE mix pressures will reverse next year.
Building Automation has the clearest runway for continued margin expansion. The business is executing the growth-and-margin playbook that other segments will follow. Data center exposure is growing, with hyperscalers and REITs becoming larger customers.
Using a forecast of 2.7% annual revenue growth and 23.4% operating margins, our model projects the stock will rise to $242 within 1.9 years. This assumes a 20.3x price-to-earnings multiple.
That represents slight compression from Honeywell’s current P/E of 22x. The multiple reflects transition risks as the company separates into three entities, balanced against improved operational focus post-spin.
The real value lies in streamlined automation businesses with stronger pricing power, reduced legacy liabilities, and better capital allocation.
Our Valuation Assumptions
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Our Valuation Assumptions
TIKR’s Valuation Model lets you plug in your own assumptions for a company’s revenue growth, operating margins, and P/E multiple, and calculates the stock’s expected returns.
Here’s what we used for HON stock:
1. Revenue Growth: 2.7%
Honeywell faces near-term headwinds but has structural growth drivers.
Portfolio Simplification: After spinning off Advanced Materials and Aerospace, the remaining automation business will have a clearer focus. Management is realigning into Building, Process, and Industrial segments based on cohesive business models.
Building Automation Momentum: Data centers, healthcare, and hospitality are driving mid- to high-single-digit growth. The U.S., the Middle East, and India remain strong. Europe returned to organic growth for four consecutive quarters.
Aerospace Recovery: Defense and Space demand are benefiting from rising global defense budgets. The commercial aftermarket should grow steadily. OE shipments are realigning with build schedules after supply chain disruptions.
Energy Market Stabilization: While catalyst demand remains soft due to oil prices and overcapacity, long-cycle LNG and gas projects show strong order momentum. UOP orders grew 9% in Q3, signaling improving underlying demand.
2. Operating margins: 23.4%
Honeywell expects to return to margin expansion in 2026 after a transitional 2025.
Current Performance: Q3 segment margin met guidance at the high end, with Building Automation leading expansion.
2026 Tailwinds: Pricing will strengthen as tariff-related cost pressures stabilize. Aerospace pricing lagged in 2025 but will catch up. CAES acquisition integration costs will subside. OE mix will become less intense.
Segment Outlook: Building Automation continues expanding margins through commercial excellence and productivity. Industrial Automation has good visibility into margin expansion from improving backlog and fixed-cost leverage. Energy & Sustainability Solutions expects to return to historical margin levels as catalyst timing normalizes.
Productivity Focus: The company is implementing its accelerated operating model across segments, driving both variable-cost improvements in direct materials and fixed-cost optimization.
3. Exit P/E Multiple: 20.3x
The market currently values Honeywell at 21.9x earnings. We assume the multiple compresses slightly to 20.3x through our forecast period.
Reflects Transition Risk: Honeywell’s P/E has averaged 20.3x over the past year and 20.4x over 3 years. The slight compression accounts for execution risk during the portfolio separation.
Quality Warranted Post-Spin: The independent automation companies should command market multiples due to focused strategies, strong installed bases across 70+ countries, recurring revenue from outcome-based solutions through the Honeywell Forge platform, and cleaner balance sheets with reduced legacy liabilities.
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What Happens If Things Go Better or Worse?
Industrial companies face macro uncertainty and execution risk. Here’s how Honeywell stock might perform under different scenarios through December 2029:
- Low Case: If revenue growth slows to 3.2% and margins compress to 16.2%, the stock still offers a 1.4% annual return.
- Mid Case: With 3.5% growth and 17.2% net income margins (our base assumptions), we expect an annual return of 6.3%.
- High Case: If the automation strategy accelerates and Honeywell maintains 17.8% margins while growing at 3.9%, returns could hit 10.6% annually.
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The range reflects different outcomes for the portfolio separation.
In the worst case, spin execution stumbles, or end-market weakness persists longer than expected.
In the best case, the focused automation businesses achieve faster organic growth, cross-selling accelerates, pricing power improves more than anticipated, and bolt-on acquisitions strengthen the portfolio.
How Much Upside Does Honeywell Stock Have From Here?
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All it takes is three simple inputs:
- Revenue Growth
- Operating Margins
- Exit P/E Multiple
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
