Deutsche Bank maintains Buy on HON, recasts the model after the HONA spin-off and reverse stock split, with a $263 target price

Overview

This report is Deutsche Bank's recast of its Honeywell model following the completion of the Honeywell Aerospace (HONA) spin-off and the 1-for-2 reverse stock split. The analysts remove Aerospace from the forecast and re-estimate EPS and valuation based on the company's pro forma guidance issued on June 8, the reverse stock split, and acquisition and divestiture timing assumptions. The report maintains a Buy rating with a $263 target price.

Core views

The core view is that HON's portfolio transformation has entered its final stage, and after the spin-off the company can still drive earnings growth by reducing stranded Aerospace costs, repaying debt, and delivering mid-single-digit organic growth. Deutsche Bank expects 2026 adjusted EPS of $8.30, at the high end of the pro forma guidance on a converted basis, and believes adjusted EPS can grow to above $12 over the next several years. Based on roughly 15% upside from the target price relative to the current share price, the report maintains its Buy rating.

Analysis framework

The report uses an event-adjusted financial model recast approach: first reflecting the HONA spin-off and 1-for-2 reverse stock split, then assuming the Johnson Matthey Catalyst acquisition closes on July 1 and the PSS/WWS divestiture closes on October 1, and subsequently updating the 2026 and medium-term EPS path. For valuation, it uses a 25x forward 12-month P/E target multiple and compares it with the current peer median of 26x to derive the $263 target price.

Methodology notes

• Valuation methodsForward P/E valuation

  25x NTM P/E

  The report uses 25x forward 12-month P/E as the target multiple, below the current peer median of 26x, and derives the $263 target price accordingly.

• Earnings forecastAdjusted EPS model

  2026E adjusted EPS

  The report forecasts 2026 adjusted EPS of $8.30 and believes EPS can continue to rise in the coming years as stranded costs decline, debt is repaid, and mid-single-digit organic growth is achieved.

• Corporate action adjustmentModel recast for spin-off and reverse stock split

  HONA spin-off and 1-for-2 reverse stock split

  The model removes the Aerospace business and reflects the 1-for-2 reverse stock split, reducing shares outstanding to about 319 million, while also incorporating timing assumptions for the acquisition and divestiture closings.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• HON.US

  The stock of the company covered by the report

  Strengths

  After completing the HONA spin-off and 1-for-2 reverse stock split, the model is more focused on the remaining businesses; the report forecasts 2026 adjusted EPS of $8.30 and maintains a Buy rating.

  Weaknesses

  After the spin-off, the company still needs to absorb stranded Aerospace costs and relies on debt repayment, margin execution, and mid-single-digit organic growth to achieve its medium-term earnings targets.

  Comparison

  Valuation uses 25x forward 12-month P/E, below the current peer median of 26x.

  Risks

  A slowdown in global economic growth, failure to achieve longer-term financial targets, and weaker-than-expected execution on margin management and stranded cost reduction.

• Honeywell Aerospace (HONA)

  The aerospace business that has been spun off from HON

  Strengths

  The completion of the spin-off marks a key final stage in HON's portfolio transformation that began in 2023.

  Weaknesses

  After the spin-off, HON still needs to deal with Aerospace-related stranded costs.

  Comparison

  The report removes Aerospace from HON forecasts when recasting the model.

  Risks

  If stranded costs decline more slowly than expected, this could weigh on HON's margin and EPS trajectory.

Key data

• Report date2026-06-30The report cover page is dated 30 June 2026.
• RatingBuyDeutsche Bank maintains its Buy rating.
• Target priceUSD 263.00Based on a 25x forward 12-month P/E target multiple.
• Current share priceUSD 232.21Price as of 2026-06-26.
• Implied upside~15%The report states that the target price implies about 15% upside versus the current share price.
• 2026 adjusted EPS forecastUSD 8.30The report states that this forecast is essentially at the high end of the converted $3.95-$4.15 pro forma guidance range; the original guidance did not include the effect of the reverse stock split.
• Medium-term adjusted EPS target>USD 12The report body states that adjusted EPS could exceed $12 by 2029; the title mentions long-term growth through 2030.
• Reverse stock split1-for-2After the reverse stock split, shares outstanding are about 319 million.
• Valuation multiple25x NTM P/EThe report states that this multiple is below the current peer median of 26x.

Impact & implications

For investors, the report emphasizes that HON has entered a clearer pro forma earnings framework after completing the HONA spin-off, with the short-term focus shifting from portfolio reshaping to execution on cost reduction, debt repayment, and organic growth delivery. If management can reduce stranded Aerospace costs as planned and achieve mid-single-digit organic growth, the upside EPS path and support for the target price will become clearer; if macro conditions or execution fall short of expectations, valuation and earnings leverage could come under pressure.

Risks

• A slowdown in global economic growth could affect HON demand and organic growth.
• The company may fail to achieve its longer-term financial targets.
• Management execution on margin improvement and Aerospace stranded cost reduction may fall short of expectations.
• If the closing timing of the Johnson Matthey Catalyst acquisition and the PSS/WWS divestiture deviates from model assumptions, forecast comparability could be affected.

What to watch

• HON's pro forma revenue, margin, and EPS disclosures after the HONA spin-off.
• Progress in reducing Aerospace stranded costs.
• The pace of debt repayment and its contribution to EPS growth.
• Whether mid-single-digit organic growth can be delivered.
• Whether the Johnson Matthey Catalyst acquisition closes as assumed on July 1.
• Whether the PSS/WWS divestiture closes as assumed on October 1.
• Whether the upside between the $263 target price and the current share price is narrowed by earnings delivery or valuation changes.