QS Research · Michael Burry's Scion Capital analyst template · 2006
HONEYWELL INTERNATIONAL INC (HON)
As of 2026-11-11 · 11/15 boxes filled from SEC filings and market data
Report price $228.22 (close 2026-11-10)
Conclusion: WATCH
Conviction low · base case +213% · downside -32% · upside +50%
Honeywell trades at 8.4x EV/EBITDA and 10.3x P/E, the cheapest in a peer set where EMR is at 20.0x and 34.2x, despite ROIC of 20.9% against a 7.3% WACC. The discount is partly earned: TTM free cash flow is only $967M (2.6% margin, 1.3% yield) because operating cash flow collapsed to $1.95B from $6.41B in FY2025, and the $7.05B net income carries $1.93B of discontinued operations. The base case at the peer median P/E of 32.2x gives $713.46 (+213%), but that anchor is not credible for a company with a 1.3% FCF yield and a 32/100 quality score; the upside at 12x EBITDA gives $342 (+50%) and the downside at 7x EBITDA less the $5.64 exposure stress gives $180 (-21%). With the base case resting on an independent anchor that the cash flow does not support, and no dated catalyst that would force a re-rating, this is a watch: the mispricing may be forming but the rule is not met.
Key numbers
- Share price: $228.22
- Market cap: $72.43B
- Latest financial period: TTM to Sep 30, 2026
- Revenue (TTM): $37.74B
- EV / EBITDA (TTM): 8.4x
- P/E (TTM): 10.3x
- FCF yield: 1.3%
- Price / book: 3.23x
- Earnings-quality flags (TTM): Discontinued operations -$1.93B (27% of net income)
- P/E, adjusted (TTM): 8.1x
- P/E, operating (tax-normalized) (TTM): 10.3x
- EV / FCF (TTM): 85.7x
- Revenue growth (latest fiscal year): +7.8%
- ROIC (TTM): 20.9%
- WACC: 7.3%
- Economic profit spread: +13.7 pts
The 15 boxes
- ○ 1. Long-form business notes
The provided source set does not contain a usable business description: the FY2020 10-K Item 1 text is only a heading and executive-officer reference, so segment, channel and unit economics cannot be written from these sources. The numeric record starts at FY2020 revenue of $32.64B and ends at FY2025 revenue of $37.44B, with TTM to 2026-09-30 at $37.74B; FY2025 operating income was $8.13B and TTM operating income $8.55B. For valuation I would use current TTM GAAP operating earnings and cash flow, not an average, and I keep the TTM pre-tax/net income jump separate from operating income because the source does not explain it.
- ✓ 2. Competitive advantage
The sources support a scaled, contracted competitor with a large backlog and government exposure, but they do not establish a clear durable moat: competition is broad, products face considerable price competition, and brand/service/quality are cited only as important competitive factors. Operating income held at $7.56B-$8.13B in FY2023-FY2025 and was $8.55B TTM to Sep 30 2026, which is the strongest financial evidence in the sources. That supports resilience, not proven pricing power; the materials give no market-share, ROIC, or customer-retention data.
- ✓ 3. 10-Q takeaways
Q3 2026 sales were $4,994 million, up 1% reported and 7% organic, while operating margin was 14.8% (+640 bps) and segment margin 21.3% (+370 bps). Q3 operating cash flow fell to $607 million, but free cash flow rose to $688 million with 95% conversion. The company raised FY2026 guidance to $20.0B-$20.1B sales, 4%-5% organic growth, ~20.5% segment margin, $8.40-$8.45 adjusted EPS and ~$2.1B each for operating and free cash flow.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ○ 11. Impression of the shareholder letter
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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