Honeywell model update: After splitting aviation business, focus on automation and future aviation (Bernstein)
Bernstein updated its financial model for Honeywell (HON) to reflect the ongoing spinoff of its aerospace business.
Bernstein updated its financial model for Honeywell (HON) to reflect the ongoing spinoff of its aerospace business. The report shows that after the spin-off, the company will focus more on automation solutions and future aviation technology, which will make the business structure clearer and increase operating profit margin from the current 12.4% to 17.7% in 2026 and continue to grow. At the same time, balance sheet leverage will also fall significantly. The market had previously been concerned about Honeywell's large and complex business structure. This spin-off is regarded as a key step in releasing value and is expected to be re-valued by the market. However, execution risks remain. One-sentence conclusion: Honeywell's business spin-off is key to its strategic transformation and will unlock the value of undervalued businesses and create a new entity with greater profitability and clearer growth. Pros/Cons: Structural positives for Honeywell (HON.US). The market may still have doubts about the long-term value creation of spin-offs, but there is considerable room for short-term valuation repair. Catalysts: 1) detailed timeline and terms of the spin-off plan; 2) independent financial report and strategic outlook of the new company after the spin-off; 3) backlog of orders for the automation business.