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HON – Market expectations are for Uniform ROA to reach new peaks, but management may have concerns about demand, air travel recovery, and guidance

August 20, 2021

  • Honeywell International Inc. (HON:USA) currently trades above historical averages relative to UAFRS-based (Uniform) earnings, with a 37.7x Uniform P/E. At these levels, the market is pricing in bullish expectations for the firm, but management may have concerns about life cycle solutions and services demand, the pace of narrow body flight hours recovery, and their financial guidance.
  • Specifically, may lack confidence in their ability to hit their EPS projections, reduce fixed costs, and meet cash flow guidance. Furthermore, management may have concerns about pricing headwinds, the pace of recovery of narrow body flight hours, and the sustainability of life cycle solutions and services demand. Moreover, they may lack confidence in their ability to develop hardware-agnostic software solutions and a unique quantum operating system, advance technology while simultaneously driving commercialization, and effectively automate mask production. Also, they may be concerned about PMT margins, uncertainty regarding virus case rates, and their growth trajectory over the next two years. Finally, management may be exaggerating their position in click-and-collect consumer buying as well as the potential of future e-commerce sales growth.