Our $265 price target is based on 23x our 2026E EPS estimate of $11.50. Our target multiple is modestly above the mid-point of HON’s historical valuation range (5yr range ~12-28x) and reflective of the premium (relative to S&P500) we think investors could ascribe to HON’s relatively higher visibility vs. peers, consistent execution in a potentially choppier macroeconomic environment in the near term, and ongoing portfolio separation.

Aerospace could stay considerably weak given relatively less frequent flying/reduced business travel despite vaccine availability and weigh on estimates. Additionally, low oil prices could keep demand trends relatively muted in the Energy end market further pressuring top-line growth. Margins could be under pressure if volumes fail to pick up. Given relatively rich valuations, M&A could be slow or too expensive, hence impacting shareholder returns.  These factors could prevent the share price from reaching our target price.