Initiation of Coverage Honeywell Aerospace Inc: Navigating near-term nuances with upside on the horizon; Initiate at Neutral

研报英文原文证据摘录

Initiation of Coverage Honeywell Aerospace Inc: Navigating near-term nuances with upside on the horizon; Initiate at Neutral

ealthy end-markets, but with growth below peers, and model margin expansion but

see a drag from mix headwinds. We believe a valuation discount to peers is merited as a result, which

is already reflected in the stock.

evidence Growth: we model revenue by end-market based on our forecasts for both industry growth rates

and defense customer demand, supporting an 8% OE, 7% AM, and 6.5% Defense CAGR through

2030. Decelerating aftermarket growth reflects our view that aircraft retirements will normalize to

~3% of the fleet from ~1.5% today, a headwind to legacy gen aftermarket and fleet age.

Margins: we triangulate margins based on a combination of end-market mix and incrementals,

supporting 150bps improvement by 2030. HONA invested >$1bn in supply chain 2023-2025 and

increased company funded R&D, which will help offset OE mix drag.

WHAT´S PRICED IN? Based on our target multiple of 14.8X 5-8Q EBITDA and 27.4% EBITDA margin estimate, it appears

the market is pricing in 5-8Q revenue of $20.4bn, vs. our estimate of $21.2bn and consensus at

$21.2bn. This suggests the market is not fully reflecting the earnings potential in our estimates.Please

Upside/Downside

Spectrum

2 year revenue 5-8Q EBITDA Valuedrivers NTM FCF

CAGR margin

$309 upside 10% 29.5% $3.4bn

$231 base 8% 27.5% $2.6bn

$151 downside 5% 24.5% $1.8bn

Source: Company data, UBS estimates

Company Description Honeywell Aerospace develops and manufactures mission-critical aerospace systems and

components for commercial aviation, defense, business aviation, and space platforms, with a focus

on highly engineered avionics, propulsion, navigation, power, connectivity, and safety systems.