Honeywell (HON) After Two Spin-Offs: Valuing What Is Left
Open a stock screen today and Honeywell shows a trailing P/E of 8.0. It looks like the cheapest industrial in the index. It is not, and the reason is a good way into the whole story: the trailing earnings of $25.77 per share include the accounting from a company that no longer exists in that form. Net income for the June quarter in my data feed was $5.7 billion, against $0.8 billion the quarter before, and I read that jump as breakup accounting, not as operating strength. Anything divided by that number is noise.
The cleaner way to look at the stock is against what management now guides. Honeywell Technologies, the name of what remains after the aerospace separation, expects adjusted EPS of $8.05 to $8.35 for 2026. At around $206.46 as I write this, that is roughly 25 times the midpoint. My view: the market is paying a full, conglomerate-sized multiple for a smaller, more focused company that has not yet shown its new margin structure for a full year, so I would treat it as a hold-and-watch, not a bargain.
Why the trailing numbers mislead
Two pieces have left. Solstice Advanced Materials went first, in the fall of 2025. Honeywell Aerospace followed on June 29, 2026, and now trades on Nasdaq under the symbol HONA. What is left is a company with about $19.8 to $20.0 billion of guided 2026 sales, according to the second-quarter release. The last full year my database carries under the old, blended structure is 2025, with revenue of $37.4 billion. Nearly half of that is gone.
That matters for every ratio on a data page. The 52-week high of $269 was set by the blended company, so “stock is 23.2% below its high” describes a comparison between two different businesses. The five-year average P/E of 24.9 is also a blended figure. Even the trailing dividend yield of 4.55% mixes pre-split payouts. The quarterly dividend in my record steps from $1.19 in the spring to $0.70 in August. If $0.70 holds, that is $2.80 a year, or about 1.4% on today’s price, and I would use that number, not the screen’s.
None of this is a criticism of the data provider. Spin-offs break time series, and anyone reading a chart of Honeywell across 2026 is reading three companies stitched together. I have found that the fastest way to stay sane is to ignore history and price the remainder on its own guidance.
What the remainder earns
Honeywell Technologies reported second-quarter sales of $5.2 billion, up 3%, with organic growth of 4%, adjusted EPS of $1.95 against a consensus of $1.82, and a segment margin of 19.0%, up 100 basis points. Those figures come from the company’s release. The stock rose +5.7% on the day (July 23), against an average absolute earnings-day move of 5.0% across the last six reports.
Look at the pieces. Process Automation and Technology posted $1.7 billion in sales at a 22.1% segment margin, which is 180 basis points lower than a year earlier. Industrial Automation had $1.5 billion, up 4% organically, at 17.2%, up 90 basis points. Building Automation, the largest of the three at about $2.0 billion of quarterly sales in my data, is the piece I have the least detail on, and I would not pretend otherwise.
The full-year guide is where the story sits. Management raised the segment margin outlook to 20.1% to 20.5%, an expansion of 250 to 290 basis points, and adjusted EPS to $8.05 to $8.35. Now compare: the quarter came in at 19.0%. For the year to land inside the range, the remaining quarters have to average above the second-quarter figure. I do not have the first-quarter margin on a comparable basis, so I cannot say how much above. I can say the guide is a bet on the second half, not a description of the first.
Process Automation’s 180-basis-point slip is the number I would understand before anything else. Project-heavy businesses swing with mix, and one weak quarter proves little. Two would.
What the price asks
Here is the arithmetic. At $206.46, and a market value of $65.4 billion, the stock is near 3.3 times guided sales. On the guided EPS range it sits between 24.7 times ($8.35) and 25.7 times ($8.05). My database carries a forward EPS estimate of $8.70, which gives 23.7 times; that is a different, higher-EPS basis and probably a different share count or calendar, so I would not mix the two.
Twenty-five times is not a distressed multiple. It is close to the 24.9 five-year average for the old conglomerate, and that conglomerate included an aerospace business the market liked. If a breakup is supposed to unlock value, I would expect the leftover to trade at a discount until it proves the margin story, or at a premium only if growth clearly outruns the old blend. Organic growth of 3% to 4% guided for the year does not clearly outrun anything.
I wrote about how to turn a multiple into a required growth rate in the reverse-DCF piece, and the same discipline applies here. At $8.20 of EPS, a price near $205 already assumes the margin expansion arrives. The table shows what other multiples would mean for the shares.
| Multiple on $8.20 guided EPS | Implied price | Versus about $206 |
|---|---|---|
| 20x | $164 | about -21% |
| 22x | $180 | about -13% |
| 25x | $205 | about -1% |
| 28x | $230 | about +11% |
Read it as a range of outcomes, not a target. A drop to 22 times, which is not an exotic multiple for an industrial with a 20% segment margin, would cost holders about 13%. A move to 28 times would need the market to believe in growth the guide does not show.
Aerospace is the other half of the trade
Anyone who held Honeywell before June now owns two stocks, and judging one without the other is a partial exercise. Honeywell Aerospace reported second-quarter sales of $4.5 billion, up 5%, net income of $0.3 billion and adjusted EBIT of $1.0 billion. Then it cut its 2026 outlook: organic growth of 4% to 5% instead of 7% to 9%, and pro forma adjusted EBIT of $4.35 to $4.45 billion instead of $4.65 to $4.75 billion. It also guided pro forma adjusted EPS of $7.60 to $7.90. Those numbers are in the company’s Q2 report, and the reported reason is supply chain constraints.
I read that as a warning about the setup, not the fundamentals of the remainder. The spin-off happened in the middle of a quarter where the aerospace side could not ship as fast as planned. The remainder does not share those supply problems, and that is a small point in its favor. But it also means the combined value of the two pieces is not obviously higher than the old whole, at least not yet. The market has had a few weeks to price it, and the answer so far looks like a stock down about 23.2% from a blended high with the composition changed underneath.
Analysts are divided, though not sharply. Of 12 covering the stock, 67% rate it Buy, with targets from $250 to $293 and an average of $264. Every target sits above the price. I suspect some were never rebased for the split, because a target of $264 next to a price of $206 looks like a pre-spin number. That is a guess, and I mention it only because averaging stale targets would overstate upside. I would give this line of the data little weight until the coverage refreshes.
Where the margin story could fail
The counter-case I take most seriously is simple. Suppose Process Automation stays near a 22% margin instead of recovering, and Industrial Automation gives back its gains when industrial demand softens. Then the year ends near 19.5% and EPS near the low end of $8.05, not the midpoint. A stock at 25 times the low end is at 25.7 times, which is only a small change. The multiple would have to compress for the price to fall, and the risk is that it does.
The other risk is the split itself. A newly separated company carries stand-alone costs it did not have as a division. The guide includes them, but first-year estimates of stranded costs tend to move. My data also shows short interest of 2.0% of float, low enough to say nobody is betting heavily against the story.
What I lean toward is patience. A company in transition should be compared with itself two quarters from now. I would judge it on segment margin at or above 20% in the third quarter, organic growth at or above 4%, and the first clean look at free cash flow, which I do not have a verified guide for and will not quote from memory. Compare that with what I look for in a stock at a similar multiple and the framework is the same: pay for what has been shown, not what has been promised.
The threshold I would hold it to
The number I would wait for is a third-quarter segment margin of 20.5% or better with organic sales growth of at least 4%. That would put the year on track for the top of the guided range and make 25 times look reasonable, since EPS would be heading to $8.35. If margin prints below 19.5%, I would expect the multiple to drift toward 22 times, or roughly $180 on the midpoint.
A breakup does not create value on its own. It gives the market a cleaner set of numbers, and this one will take a couple of quarters to be useful. Until then the P/E of 8 on the screen is a curiosity, and the 25 on guidance is the figure to argue with.
Analysis and opinion only, not investment advice. Figures come from Honeywell Technologies’ and Honeywell Aerospace’s second-quarter 2026 releases, from Honeywell’s filings on SEC EDGAR and its company site; market data and multiples are approximate and were checked on September 22, 2026.