RBC initiates a tier-1 U.S. aerospace and defense parts maker, calling its 6%8% growth framework conservative and citing APU pricing power, business aviation, and a spin-off tailwind.
On June 26, 2026, Ken Herbert of RBC Capital Markets initiated coverage with an Outperform rating and a US$300.00 price target on Honeywell Aerospace Inc. (HONAV:NASDAQ), implying roughly 36% total return from the prior trading day’s closing price of US$221.01, on the view that the company’s end-market mix supports top-line growth at the upper end of its 6%–8% long-term guidance alongside steady margin expansion.
The price target is derived from an 18.4x multiple applied to RBC’s 2028 estimated adjusted EBITDA of US$6,037M, a level the firm views as roughly in line with the A&D peer set trading at about 19x on 2028 EBITDA estimates.
Company profile and segment mix
Honeywell Aerospace is a tier-1 aerospace and defense supplier of mission-critical systems whose installed base spans roughly 90% of in-service aircraft, with content on more than 250 in-production A&D platforms.
The business is managed across three reporting segments — Electronic Solutions (39% of revenue), Engine & Power Systems (31%), and Control Systems (30%) — but is guided on an end-market basis, split 44% Commercial Aftermarket, 41% Defense & Space, and 15% Commercial OE on a pro forma 2025 basis. The customer base is concentrated, with the top 10 accounting for about 37% of revenue, and geographically weighted toward the US at 73%.
Growth outlook
RBC models 8.2% revenue growth in 2026 and a ~7.4% CAGR over 2025–2028, with the firm characterizing the company’s 6%–8% long-term framework as conservative. By end market, the firm models 8.0% growth for Commercial OE, 7.5% for Commercial AM, and 7.0% for Defense & Space through 2028.
The growth algorithm is broken down into roughly 4% volume, 3% pricing, and 2% new business, partially offset by about -2% from reduced content on certain in-production commercial air transport platforms. A backlog of about US$19B, more than US$90B in new contract wins, strong OEM build rates, an aging commercial fleet, and robust global defense budgets are cited as support, with M&A representing unmodeled upside.
Key debates
Under-investment narrative. Following the loss of the flight deck on the Boeing 787 and 737 MAX, investors have questioned the company’s investment posture. RBC argues this narrative is “relatively stale,” noting that R&D and capex as a percentage of sales sit broadly in line with peers once normalized for new-engine programs, and that roughly US$1B of supply chain investment addresses the most glaring weakness.
Aftermarket and pricing power. With Commercial AM at about 44% of 2025 sales, RBC models 7.5% aftermarket growth from 2026–2028, viewing supply chain improvement as the key unlock. The firm sees pricing leverage anchored by the APU franchise — Honeywell invented the APU in the 1950s and holds about 47K units in service — and by the HTF7000 business-jet engine. Increased focus on RMUs (about US$800M in 2025 commercial revenue) is expected to support the company’s “right to price.”
Business aviation. Roughly 20% of revenue, business aviation is framed as a net positive, with fractional operator flight hours growing at about a 10% CAGR since 2019 — ahead of total flight hours at about 6%. The landmark agreement with Bombardier, signed on December 2, 2024, and worth up to US$17B over its life, underpins the backlog and supports R&D on the Anthem next-generation cockpit.
Spin-off precedent. RBC notes that industrial spin-offs across its coverage have, on average, outperformed the S&P 500 by about 30% and the Industrial XLI by about 27% in the year following separation, citing precedents such as CARR, GEV, and GE. As a standalone entity, the company gains operational focus through its new HONA OS and greater capital allocation flexibility.
Valuation and financials
RBC’s comp work shows the company trading at about 15.5x 2028E EBITDA versus an all-peer average of roughly 19.0x.
RBC estimates adjusted EPS of US$9.93 in 2026, US$10.97 in 2027, and US$12.12 in 2028, with adjusted EBIT margins held above 25% and 30%+ incremental adjusted EBIT margins through 2028. Free cash flow is modeled at about US$2,467M in 2026, rising to about US$3,292M by 2028, with net leverage declining from roughly 3.0x at spin to about 1.2x by 2028. Each ~0.5x turn on the EBITDA multiple is estimated to move the stock by about US$9.
Scenarios and risks
RBC frames an upside scenario of US$363 (a 20.4x multiple on ~US$6.4B of EBITDA on ~US$22.1B of sales) and a downside scenario of US$206 (a 16.4x multiple on ~US$5.0B of EBITDA, assuming a 4.4% revenue CAGR and ~US$19.8B of sales).
Key risks include defense appropriations magnitude and timing, reduced content on next-generation commercial platforms, supply chain and material availability, the pace of new business wins, the cadence of aircraft deliveries, and macro, geopolitical, and fuel-price volatility. RBC also flags the company’s defense-contractor status as a sustainability headwind. At US$221.01, the shares offer roughly 36% implied total return to the US$300 target.
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Disclosures for RBC Capital Markets, Honeywell Aerospace Inc., June 26, 2026
Conflicts disclosures The analyst(s) responsible for preparing this research report received compensation that is based upon various factors, including total revenues of the member companies of RBC Capital Markets and its affiliates, a portion of which are or have been generated by investment banking activities of the member companies of RBC Capital Markets and its affiliates. With regard to the MAR investment recommendation requirements in relation to relevant securities, a member company of Royal Bank of Canada, together with its affiliates, may have a net long or short financial interest in excess of 0.5% of the total issued share capital of the entities mentioned in the investment recommendation. Information relating to this is available upon request from your RBC investment advisor or institutional salesperson. Please note that current conflicts disclosures may differ from those as of the publication date on, and as set forth in, this report. To access current conflicts disclosures, clients should refer to https://www.rbccm.com/GLDisclosure/PublicWeb/ DisclosureLookup.aspx?entityId=1 or send a request to RBC CM Research Publishing, P.O. Box 50, 200 Bay Street, Royal Bank Plaza, 29th Floor, South Tower, Toronto, Ontario M5J 2W7. A member company of RBC Capital Markets or one of its affiliates managed or co-managed a public offering of securities for Honeywell Aerospace Inc. in the past 12 months. A member company of RBC Capital Markets or one of its affiliates received compensation for investment banking services from Honeywell Aerospace Inc. in the past 12 months. Explanation of RBC Capital Markets Equity rating system An analyst’s ‘sector’ is the universe of companies for which the analyst provides research coverage. Accordingly, the rating assigned to a particular stock represents solely the analyst’s view of how that stock will perform over the next 12 months relative to the analyst’s sector average. Ratings Outperform (O): Expected to materially outperform sector average over 12 months. Sector Perform (SP): Returns expected to be in line with sector average over 12 months. Underperform (U): Returns expected to be materially below sector average over 12 months. Restricted (R): RBC policy precludes certain types of communications, including an investment recommendation, when RBC is acting as an advisor in certain merger or other strategic transactions and in certain other circumstances. Not Rated (NR): The rating, price targets and estimates have been removed due to applicable legal, regulatory or policy constraints which may include when RBC Capital Markets is acting in an advisory capacity involving the company. Risk Rating The Speculative risk rating reflects a security’s lower level of financial or operating predictability, illiquid share trading volumes, high balance sheet leverage, or limited operating history that result in a higher expectation of financial and/or stock price volatility.
Distribution of ratings For the purpose of ratings distributions, regulatory rules require member firms to assign ratings to one of three rating categories – Buy, Hold/Neutral, or Sell – regardless of a firm’s own rating categories. Although RBC Capital Markets’ ratings of Outperform (O), Sector Perform (SP), and Underperform (U) most closely correspond to Buy, Hold/Neutral and Sell, respectively, the meanings are not the same because our ratings are determined on a relative basis. Distribution of ratings RBC Capital Markets, Equity Research As of 31-Mar-2026 Investment Banking Serv./Past 12 Mos. Rating Count Percent Count Percent BUY [Outperform] 899 57.52 286 31.81 HOLD [Sector Perform] 612 39.16 153 25.00 SELL [Underperform] 52 3.33 5 9.62 Rating and price target history for: Honeywell Aerospace Inc., HONAV US as of 25-Jun-2026 (in USD) 280 260 240 220 200 180 Q1 Q2 Q3 2024 Q1 Q2 Q3 2025 Q1 Q2 Q3 2026 Q1 Q2 Legend: O: Outperform; SP: Sector Perform; U: Underperform; R: Restricted; I: Initiation of Research Coverage; D: Discontinuation of Research Coverage; NR: Not Rated; NA: Not Available; RL: Recommended List – RL: On: Refers to date a security was placed on a recommended list, while RL Off: Refers to date a security was removed from a recommended list; Rtg: Rating. Created by: BlueMatrix References to a Recommended List in the recommendation history chart may include one or more recommended lists or model portfolios maintained by RBC Wealth Management or one of its affiliates. 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Honeywell Aerospace Inc. Valuation Our $300 price target is based on applying an 18.4x EV/EBITDA multiple to our proforma 2028E EBITDA framework of ~$6.0B. We view the company as well-positioned to achieve M-HSD revenue growth and see potential upside to fundamentals via optimizing the supply chain and new business wins. We see upside to the current valuation at an implied ~15.5x 2028E EBITDA multiple. We believe our valuation framework applies a multiple comparable to other A&D peers (mid-18x). We view our price target as supportive of our Outperform rating. Risks to rating and price target The key risks to our rating and price target include: 1) Defense appropriations, both in magnitude and timing as political headwinds generally persist in the defense & space end market; 2) less content on in-production commercial air transport platforms than previous generations hampering revenue growth; 3) supply chain and material availability amidst the company’s effort to invest in its new OS; 4) the pace of new business opportunities and the ability to win content on existing and new platforms; 5) the pace of new aircraft deliveries and replacement of existing parts on current aircraft fleet; 6) macro and geopolitical uncertainty and the volatility of fuel prices caused by instability. Conflicts policy RBC Capital Markets Policy for Managing Conflicts of Interest in Relation to Investment Research is available from us on request. 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