Honeywell International's (HON) growth outlook is improving after the Aerospace spin, supported by a more focused portfolio and stronger innovation, Morgan Stanley said in a note Monday.
At its recent investor day, the company outlined the success of its Building Automation business, where higher research and development spending of about 4.5% of pro forma 2025 sales, versus 3.5% to 4% five years ago, has helped drive innovation and new products, the firm said.
The company now has an opportunity to apply the same strategy to its Industrial Automation and Process Automation and Technology businesses, according to the note.
Morgan Stanley said consensus is already forecasting about 6% organic growth in 2027, at the top end of Honeywell's 4% to 6% three-year investor day target, "limiting revision potential for an equity that is already trading at 2x turns higher PE vs. the past 5 years in anticipation of this growth."
The investment firm said it now forecasts 2026 earnings per share of $8.31 and expects organic growth of about 5.5% in H2.
Morgan Stanley raised its price target on Honeywell to $250 from $245 and maintained its equal-weight rating.
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