Nomura Securities Downgrades Honeywell (HON) to Neutral

Nomura Securities downgraded Honeywell International (NYSE: HON) from Buy to Neutral but raised their price target from $85 to $88. The firm cited valuation.

Analyst Shannon O'Callaghan comments, "We have been strong supporters of Honeywell management for years and the 10-year transformation of this company has been remarkable. We expect Honeywell to continue its strong execution and see further opportunities for the company to drive improvement. But valuation metrics that we look at are now extended. Honeywell used to be cheaper than its P/E, but now we think it is more expensive than its P/E. On our PAP/E metric (which adjusts for pension accounting differences across peers), HON is now trading at an 11% premium to the sector."

Well Deserved Praise But Sentiment Sea Change Has Extended the PAP/E Premium. We have been strong supporters of Honeywell management for years and the 10-year transformation of this company has been remarkable. We expect Honeywell to continue its strong execution and see further opportunities for the company to drive improvement. But valuation metrics that we look at are now extended. Honeywell used to be cheaper than its P/E, but now we think it is more expensive than its P/E. On our PAP/E metric (which adjusts for pension accounting differences across peers), HON is now trading at an 11% premium to the sector. We raise TP to $88, but downgrade to Neutral on valuation. FY13E EPS at $4.95; FY14E EPS at $5.5.

For an analyst ratings summary and ratings history on Honeywell International click here. For more ratings news on Honeywell International click here.

Shares of Honeywell International closed at $82.97 yesterday.

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