Morgan Stanley's analyst Kristine Liwag noted that while Honeywell Aerospace (HONA) faces fundamental challenges, including lower revenue and EBIT growth compared to peers, the stock's current valuation is attractive. HONA has experienced a significant decline of approximately 24% in the past month and about 27% since its spin-off from Honeywell in late June, primarily due to supply chain issues.
The stock is currently trading at about 16.8 times its estimated price-to-free cash flow and 11.4 times its expected enterprise-value-to-EBITDA for 2028, making it the cheapest large-cap aerospace stock covered by Morgan Stanley.
Liwag argues that the market is pricing in a prolonged operational recovery and a structurally lower earnings base, which she believes is overly punitive given the company's strong installed base and aftermarket exposure. Following the upgrade, Honeywell Aerospace shares rose more than 2%.
This upgrade contrasts with the broader market sentiment, as the majority of analysts covering the stock maintain a hold rating