Best Research Ideas

Honeywell International – Deep Dive: Going the Distance with Aerospace & Defense Firepower

— Sheila Kahyaoglu, Jefferies U.S. Equity Research – Industrials, Aerospace & Defense

Jefferies analyzed HON’s Aerospace portfolio, which appears likely to attain more market focus following the spin-off of the auto and residential businesses. Following the Garrett spin-off, Jefferies estimates 58% of the company’s Aerospace portfolio will consist of aftermarket volumes vs. the peer average of 23%. Jefferies believes HON’s aerospace portfolio, currently ~36% of revenues, is well-positioned for growth and profitability given aftermarket exposure, regulatory-driven benefits, and defense positioning as a key supplier. As a result, Jefferies raised HON’s aerospace growth and profit forecasts by 5% in conjunction with this report. In addition, HON has potential to deploy $18 billion in capital over the next three years, which would be 15% accretive to EPS. FULL REPORT