Trefis Team
4 min read
Honeywell International (HON) stock has lagged the index over the past year, trading at 8.1 times earnings against 22.7 for the median S&P 500 company. That is either a sound business on sale or a fair price for a company that just spun off its largest unit, Honeywell Aerospace, and now has to widen margins in the automation businesses it kept. So is Honeywell just as cheap on the cash it brings in?
Honeywell Is Cheaper On Earnings Than On Cash
Not quite, though the headline numbers suggest otherwise. Honeywell trades at 13.0 times its operating cash flow for the twelve months ending June 2026, compared to 15.0 for the S&P 500. However, this is an optical distortion: today’s share price was reduced to reflect the spin-off of Honeywell Aerospace, but the trailing cash flow figure still includes a full year of cash generated by that divested unit. Dividing a smaller post-spin share price by an inflated pre-spin cash flow pool artificially depresses the multiple, making Honeywell look cheaper than the continuing business actually is.
Most of the earnings behind that low multiple arrived in a single quarter. Over those twelve months, Honeywell reported net income of $8.21 billion, an amount greater than its operating income of $5.99 billion. In fiscal Q2 2026 alone, net income reached $5.68 billion, compared with $1.57 billion a year earlier. That looks like profit from outside the day-to-day business, making Honeywell’s cash the steadier guide to how cheap the stock is.
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Honeywell’s Margins Have Slipped Two Years Running
Honeywell’s operating margin stood at 18.9% in the twelve months to June 2024 and 18.7% a year later. In the twelve months to June 2026, it fell to 16.6%, dropping below the 18.1% average of those three periods. Sales moved the other way. Revenue grew 5.4% in the latest twelve months, compared with an average of 0.12% across the three.
The business Honeywell spun off was its largest, and a growing one. The Aerospace Technologies segment accounted for 46.8% of fiscal 2025 revenue and grew 13.3% that year, before Honeywell Aerospace separated on June 29, 2026. Industrial Automation, the next largest segment, saw revenue fall in both fiscal 2024 and fiscal 2025, dropping by 6.5% in the later year. While Honeywell’s twelve-month figures still include aerospace, a buyer of the shares today gets the automation company alone.
