Honeywell Aerospace Inc. (NASDAQ: HONA) shares climbed 4.2% in premarket trading on Wednesday after Morgan Stanley upgraded the stock to Overweight from Equalweight and raised its price target to $205 from the prior level.
Analyst Kristine Liwag highlighted that the company’s valuation remains at a significant discount to peers despite acknowledging structural risks. Honeywell Aerospace trades at roughly 16.8x projected 2028 free cash flow and about 11.4x 2028 enterprise value to EBITDA, below peer medians of 25.5x and 18.3x respectively. Liwag noted the current discount of approximately 35% is unwarranted, stating the valuation now ‘more than compensates for these risks.’
The upgrade follows a 27% decline in Honeywell Aerospace shares since the June 29 spin-off from Honeywell International, compared with a 5% gain in the S&P 500 over the same period. The company’s market capitalization stands at roughly $51 billion, with an enterprise value of about $65.9 billion.
Liwag emphasized that investor focus is shifting from near-term execution risks to long-term valuation questions, though she noted no indication of strategic activity or M&A interest from management. Key concerns cited include below-peer revenue and EBIT growth, limited margin expansion, trailing free cash flow conversion, and potential constraints in next-generation commercial original equipment content affecting aftermarket opportunities.
