JPM starts Honeywell Aerospace at Neutral, sees supply chain capping upside

Investing.com -- Honeywell Aerospace's strong position across commercial aviation and defense markets should support steady long-term growth, but continued investment in its supply chain is likely to cap near-term upside, J.P. Morgan said on Friday as it initiated coverage of the aerospace supplier.

The brokerage started the stock with a "Neutral" rating and a December 2027 price target of $255. It said Honeywell Aerospace's diversified portfolio provides exposure to growing aerospace markets, but execution will require higher spending that is expected to restrain margin expansion.

J.P. Morgan expects the company to grow revenue by about 7% annually through 2030, reaching nearly $25 billion. It sees the defense and space business as the biggest growth driver, helped by rising missile production and higher defense spending.

The brokerage said Honeywell's exposure to programs such as THAAD, SM-3 and Tomahawk could provide additional upside, with the company supplying guidance, navigation and electronic warfare systems across several priority U.S. missile programs.

However, it expects operating margins to remain largely flat in 2026 as the company continues investing in its supply chain and manufacturing operations. J.P. Morgan forecasts only about 200 basis points of margin expansion through the end of the decade.
The brokerage also expects free cash flow growth to accelerate later in the decade as Honeywell Aerospace reduces leverage and generates higher cash from operations. Management is expected to prioritize debt reduction, dividends and bolt-on acquisitions before regular share buybacks.

J.P. Morgan said its $255 price target is based on a 27.5-times multiple of its 2028 free cash flow estimate and reflects a modest valuation discount to comparable aerospace suppliers.

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