Morgan Stanley Sees Value in Honeywell Aerospace

Honeywell Aerospace's stock (HONA) jumped nearly 9% after Morgan Stanley upgraded it to 'Overweight' from 'Equal Weight'. The investment bank cited that the aerospace stock is currently trading at a low valuation, making it the cheapest large-cap aerospace stock covered by Morgan Stanley.

The stock trades at around 16.8 times its estimated price-to-free-cash-flow and about 11.4 times its expected enterprise-value-to-EBITDA for 2028. Morgan Stanley's fundamental concerns about Honeywell Aerospace have not disappeared, including weaker revenue and earnings before interest and taxes (EBIT) growth compared with peers.

The investment bank still flags slower growth, limited margin expansion, and weaker free cash flow conversion as risks. However, it added that the valuation now more than compensates for those risks, warranting a discount to peers but not the ~35% discount reflected today.