Wolfe Research upgraded Honeywell to Outperform from Peer Perform, elevating its sum-of-the-parts valuation to $293 per share and setting a year-end 2026 price target at the same level. The new target implies about 22% upside, according to the firm, and reflects a re-rating across aerospace and industrial peers as well as increased confidence in Honeywell's ability to expand margins in 2027 and 2028.
The brokerage raised its previous SOTP estimate from $262 to $293, citing both peer re-rating and improved execution. Wolfe noted that Honeywell's planned aerospace spin-off - slated for early July - moves the company into a period when investors typically place greater emphasis on break-up value. The firm expects that as the separation date approaches, more of that value will become apparent to the market.
Wolfe pointed to what it views as tangible operational gains. Management turnover has coincided with stronger execution, and Honeywell's revenue growth has outpaced electrical equipment and multi-industry peers for seven consecutive quarters, the firm said. Wolfe also highlighted signs that investments in Building Automation could underwrite high single-digit core growth across the remainder of the company, indicating that growth is not isolated to the aerospace segment.
Beyond the aerospace unit, Wolfe identified further potential sources of shareholder value. The firm said Honeywell might monetize its stake in Quantinuum, a quantum computing business, estimating that stake could be worth about $12 per share. Additionally, Honeywell holds a $4.4 billion pension surplus; Wolfe outlined a possible path to realize roughly $7 per share of equity value from that surplus, though it cautioned the timing of any realization is uncertain.
Wolfe did not ignore downside considerations. The brokerage acknowledged risks tied to stranded costs that could remain with Honeywell after the aerospace spin and the need to further streamline the RemainCo portfolio, which is focused on automation. These concerns help explain why the stock continues to trade at a discount, Wolfe said, although the firm believes the risk-reward balance is becoming more favorable as the separation nears.
In sum, Wolfe's upgrade rests on a mix of operational momentum, the timing of a material corporate separation, and identifiable asset values that could be unlocked through monetizations or balance sheet actions. The firm’s revised valuation embeds these elements while recognizing the practical and timing uncertainties around realizing certain sources of value.