Honeywell Aerospace (NASDAQ:HONAV) is scheduled to begin trading as a standalone public company on Monday, with TD Cowen launching coverage with a Hold rating, citing expectations for more limited earnings leverage than many of its aerospace sector peers.
The brokerage assigned the newly listed company a price target of US$250, highlighting concerns that profit growth may not significantly outpace revenue expansion over the next two years.
TD Cowen expects Honeywell Aerospace’s adjusted operating profit to increase at a rate below 10% during 2026 and 2027, supported by approximately 8% organic sales growth. The firm also anticipates only modest margin improvement and no meaningful reduction in the company’s share count over the period.
At the time of the spin-off, Honeywell Aerospace is expected to carry net debt equivalent to around 3.1 times EBITDA, which TD Cowen believes will limit the company’s ability to pursue substantial capital returns. Instead, the brokerage forecasts a relatively modest dividend, share repurchases largely aimed at offsetting equity-based compensation, and smaller bolt-on acquisitions rather than large-scale mergers and acquisitions.
“HONA’s op. profit gains are apt to exceed sales growth by only 1-2%, below that of the Buy-rated aero suppliers that we cover,” TD analysts said in a note.
The spin-off is expected to attract significant investor attention, with Honeywell Aerospace set to join both the S&P 500 and the S&P 100 on its first day of trading.
The listing is also important for existing Honeywell International (NASDAQ:HON) shareholders, who received one Honeywell Aerospace share for every two Honeywell shares they owned as part of the separation.
Not all analysts share TD Cowen’s cautious view. RBC recently initiated coverage with a Buy rating and a price target of US$300, reflecting a more optimistic outlook for the newly independent aerospace business.