HONA Stock Jumps 9% — Honeywell Aerospace Selloff Went Too Far, Morgan Stanley Says

The newly spun-off aerospace company is now the cheapest large-cap name in Morgan Stanley’s coverage, prompting the bank to turn bullish despite lingering operational risks.

• Morgan Stanley upgraded HONA to ‘Overweight’ from ‘Equal Weight.’
• Honeywell Aerospace trades at about 16.8 times estimated 2028 price-to-free-cash-flow, making it the cheapest large-cap aerospace stock covered by Morgan Stanley.
• The investment bank still flags slower growth, limited margin expansion, and weaker free cash flow conversion as risks.

Shares of Honeywell Aerospace (HONA) jumped nearly 9% after Morgan Stanley said the aerospace stock is looking very cheap and upgraded it to ‘Overweight’ from ‘Equal Weight.’ The investment bank set a $205 price target, implying nearly 28% upside from Tuesday’s close, after shares fell around 24% over the past month.

Morgan Stanley Sees Valuation As Too Punitive

Morgan Stanley said the bank’s fundamental concerns about Honeywell Aerospace have not disappeared, including weaker revenue and earnings before interest and taxes (EBIT) growth compared with peers, limited margin expansion, and free cash flow conversion that trails peers, according to a CNBC report.

“Lower next-generation Commercial [original equipment] content could constrain the long-term aftermarket opportunity,” the firm said in a note to clients. However, it added that the valuation now more than compensates for those risks. “HONA warrants a discount to peers, in our view – but not the ~35% discount reflected today.”

The company was spun out from Honeywell in late June, as supply chain issues have stymied its operations. The stock trades at roughly 16.8 times its estimated price-to-free-cash-flow and about 11.4 times its expected enterprise-value-to-EBITDA (earnings before interest, taxes, depreciation, and amortization) for 2028, making it the cheapest large-cap aerospace stock covered by Morgan Stanley.

HONA’s Valuation Reflects Tough Recovery

At current levels, Honeywell Aerospace is pricing in a more protracted operational recovery as well as a structurally lower long-term earnings and free cash flow base, Liwag said.

“We see risk to the former, but believe the latter is overly punitive given HONA’s installed base, aftermarket exposure, defense portfolio, and underlying end market demand,” Morgan Stanley wrote.

HONA Stock: Stocktwits Retail Sentiment

On Stocktwits, retail sentiment on HONA improved to “neutral” from “bearish” in the past 24 hours, while message volume was “low.”

Morgan Stanley’s call runs counter to consensus on Wall Street. Of the 15 analysts covering Honeywell Aerospace, nine have a ‘Hold’ rating on the stock while six have a ‘Buy’ or ‘Strong Buy’ rating, according to Koyfin.

HONA stock has lost nearly 13% year-to-date.

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