Morgan Stanley Turns Bullish on HONA Stock, Sees 28% Upside

Morgan Stanley has upgraded Honeywell Aerospace (HONA) to 'Overweight' from 'Equal Weight', citing that its valuation is too punitive. Shares of HONA jumped nearly 9% after the upgrade, with a price target set at $205, implying nearly 28% upside from Tuesday's close.

The investment bank still flags operational risks, including slower growth, limited margin expansion, and weaker free cash flow conversion. However, Morgan Stanley believes that these risks are now reflected in the stock's valuation, making it the cheapest large-cap aerospace name in their coverage.

HONA trades at about 16.8 times estimated 2028 price-to-free-cash-flow, with a 35% discount to peers. The investment bank sees risk to HONA's operational recovery but believes its installed base, aftermarket exposure, and defense portfolio mitigate the impact of a structurally lower long-term earnings and free cash flow base.

Morgan Stanley's call runs counter to consensus on Wall Street, where nine out of 15 analysts covering HONA have a 'Hold' rating, while six have a 'Buy' or 'Strong Buy' rating.