Honeywell International Inc.HONNASDAQ

Overview Intelligence Charts News Fundamentals Key Metrics TTM Financials Earnings Growth Rating Analysts Institutional Peers Historical

DCF Valuation

DCF Valuation Summary

Sell

Fair Value: $218.31 per share(market-calibrated)

-12.0%

Upside to Fair Value

Current

$248.04

Pure Model

$215.37

Fair Value

$218.31

Bull Case

$266.50

Bear Case

$171.63

Market Reality Check

Model Terminal Growth

2.25%

Market-Implied Growth

3.56%

Calibrated Growth

2.45%

Fair value uses 85% model / 15% market-implied terminal growth. Pure model: $215.37.

What's Driving This Ratingfor HON

✓

CapEx already efficient

CapEx at 2.59% of revenue is already at or below sector maintenance level. No normalization needed — cash conversion is already strong.

✓

Premium margins already priced in

EBIT margin of 20.76% is already well above sector average. The model holds this level — there's limited room for margin expansion to drive upside. Valuation depends primarily on revenue growth.

→

Moderate revenue growth

Analyst consensus projects 5.72% revenue growth, fading to 2.25% by Year 10. Revenue reaches $53.8B (vs $37.4B today).

🎯

Market pricing in higher long-term growth

To justify $248.04, the market implies 3.56% perpetual growth — 131bps above the model's 2.25%. This suggests the market sees additional growth catalysts (AI, new products, market expansion) not captured in analyst estimates.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 73.53% indicates efficient cash generation. FCF reaches $9.6B by Year 10 (17.75% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.93

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)8.69%

Cost of Debt

Pre-tax Cost of Debt2.27%

Tax Rate17.98%

After-tax Cost of Debt1.86%

Equity Weight (E/V)82.09%

Debt Weight (D/V)17.91%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (82.09% × 8.69%) + (17.91% × 1.86%)

= 7.46%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$39.6B	$44.2B	$48.2B	$50.4B	$53.8B
EBIT	$8.2B	$9.2B	$10.0B	$10.5B	$11.2B
Tax	$1.5B	$1.7B	$1.8B	$1.9B	$2.0B
NOPAT	$6.7B	$7.5B	$8.2B	$8.6B	$9.2B
+ Depreciation	$1.3B	$1.5B	$1.6B	$1.7B	$1.8B
- Capex	$1.0B	$1.1B	$1.2B	$1.3B	$1.4B
- Δ NWC	$65M	$71M	$32M	$34M	$36M
Free Cash Flow	$7.0B	$7.8B	$8.5B	$8.9B	$9.6B
Discount Factor	0.931	0.806	0.698	0.604	0.487
Present Value	$6.5B	$6.3B	$6.0B	$5.4B	$4.7B

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$9.6B

Terminal Growth Rate2.25%

WACC7.46%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$187.4B

PV of Terminal Value$91.3B

Exit Multiple Method

Year 10 EBITDA$13.0B

Exit Multiple (EV/EBITDA)18.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$233.9B

PV of Terminal Value$113.9B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$57.1B

PV of Terminal Value$91.3B

Enterprise Value$148.4B

(-) Net Debt$22.1B

Equity Value$126.3B

Shares Outstanding639M

Price per Share$197.66

Exit Multiple Method

PV of Projected FCFs$57.1B

PV of Terminal Value$113.9B

Enterprise Value$171.0B

(-) Net Debt$22.1B

Equity Value$148.9B

Shares Outstanding639M

Price per Share$233.08

Pure Model Fair Value

$215.37

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	1.25%	1.75%	2.25%	2.75%	3.25%
5.46%	$277.25	$292.06	$311.47	$338.05	$376.63
6.46%	$234.81	$243.47	$254.19	$267.79	$285.63
7.46%	$203.29	$208.80	$215.37	$223.33	$233.18
8.46%	$178.50	$182.22	$186.53	$191.60	$197.64
9.46%	$158.24	$160.85	$163.83	$167.25	$171.22

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$171.63

-30.8% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 1.16

Base Case

$215.37

-13.2% vs current

• Analyst consensus
• Terminal growth: 2.3%
• Beta: 0.93

Bull Case

$266.50

7.4% vs current

• +25% vs analyst consensus
• Terminal growth: 2.8%
• Beta: 0.79

Key Assumptions & Drivers• Industrials Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth5.72%

Year 3 Revenue Growth5.61%

Year 5 Revenue Growth2.25%

Year 7 Revenue Growth2.25%

Year 10 Revenue Growth2.25%

Terminal Growth Rate2.25%

Margin & Efficiency

Current EBIT Margin20.76%

Tax Rate17.98%

Historical Capex / Rev2.59%

NWC / Revenue3.04%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 18x EV/EBITDA (Industrials sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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