$45.20
$123.40
bear $45.20
base $84.90
bull $123.40
margin of safety $42.00
market price* $211.41
Honeywell is now an automation company. Over the past year it has been taken apart: the Solstice advanced-materials business was spun off in October 2025, the Quantinuum quantum-computing business was deconsolidated in June 2026 after its public listing (Honeywell keeps about 48 percent), and the Aerospace business was spun off on June 29, 2026, together with a one-for-two reverse stock split that left about 317 million shares. What remains is Building Automation (about $2.0 billion of quarterly sales, margin 27 percent), Process Automation and Technology (about $1.7 billion, catalysts, licensing and process equipment) and Industrial Automation (about $1.5 billion, scanning, sensing and controls), plus the Johnson Matthey catalyst business bought on July 17, 2026 for $1.75 billion. The company is also selling its Productivity Solutions and Services and Warehouse and Workflow Solutions units, which removes roughly $400 million of 2026 sales. Backlog is about $20 billion, roughly a year of sales. HOW WE MEASURED THE EARNINGS. No annual report exists yet for the company in its present form; the 10-K for 2025 and the June 2026 quarterly report both still include Aerospace. We therefore built the automation business's cash earnings by allocating the combined company's audited cash flow by each business's share of segment profit (51 percent in 2025, 52 percent in 2024, 53 percent in 2023), then deducting about $370 million a year after tax for corporate costs that the automation company now carries alone. We then cross-checked the result against the cash flow management guided for 2026 (about $2.1 billion of operating cash flow, which includes one-time separation costs); our figure sits about 10 percent above that once those costs are stripped out, so we rounded the level down. Owner earnings are cash from operations less working-capital swings, less stock compensation, less maintenance capital spending. We stripped out two non-recurring items: the $1.3 billion asbestos-related NARCO payment in 2023, and the net $162 million of settlements in 2025 (a $1.59 billion receipt from Resideo against a $1.43 billion asbestos payment). Cash restructuring payments of roughly $400 to $470 million a year were left in as a real recurring cost. Amortisation of acquired intangibles rose to $842 million in 2025 and the company wrote off $724 million of goodwill and $270 million of assets held for sale that year; we did not adjust the earnings level for these, but we treat them as evidence that acquired earnings decay, so the growth credited below is deliberately low and the bear case includes the risk of further write-offs. The result is cash earnings before interest of about $2.5 billion a year (about $7.85 a share), from the 2023 to 2025 window: the earlier combined years describe a different business. For reference, interest on the automation company's debt is about $0.7 billion a year, so earnings after interest are about $5.65 a share. GROWTH CHECK. The allocated 2025 cash earnings were about 24 percent above 2024, but that jump comes mostly from the combined company's unusually strong 2025 cash flow, not from a growth trend; automation segment profit was $4.31 billion in 2023, $4.26 billion in 2024 and $4.39 billion in 2025, about 1 percent a year. The base case therefore starts at 1 percent in year one, well below the trailing figure, and no dated reason exists to assume faster growth. WHAT THE COMPANY OWES. At June 30, 2026 the consolidated company, still including Aerospace, had $34.0 billion of borrowings and $9.2 billion of cash and short-term investments. Aerospace carries $15.9 billion of notes issued for the spin-off and $1.1 billion of cash, so we estimate the automation company owes about $18.1 billion, of which $5.3 billion was due within a year and $2.5 billion was commercial paper at June 30. After setting aside about $1.5 billion of cash to run the business, about $6.6 billion of cash is surplus, giving net debt of about $11.5 billion, or $36 a share. We treated the Johnson Matthey purchase at cost, with neither its earnings credited nor its price deducted, and left out the sale proceeds of the two disposals. Because most of the borrowing is long-dated fixed-rate debt costing roughly 3.8 percent (about $1.3 billion of cash interest on $34.6 billion of debt in 2025), we reduce the debt figure by $1.5 billion in the base and bull cases; the bear case takes no such credit. We did not count the Quantinuum stake (carrying value $7.3 billion, or about $23 a share), because its value rests on a market listing a few months old, not on earnings we can evidence. These debt figures are our estimate because no balance sheet of the new company has yet been filed. THE THREE CASES. The base case credits only what the record supports: cash earnings grow 1 percent a year for ten years, the pace automation segment profit actually delivered from 2023 to 2025, then stay level through year 30 as the installed base of building controls, process licences and service contracts keeps earning, and nothing after that. The business is worth about $116 a share, it owes about $31 a share (net debt after the cost-of-debt credit), leaving about $85. We did not credit the 20.1 to 20.5 percent margin target, the 16 percent jump in Q2 orders, or acquisition synergies, because none of these has shown up in earnings yet. The bull case lets the company's own levers work: Industrial Automation returns to the $2.2 billion segment profit it earned in 2023 (adding about $1.2 a share) and earnings then grow 3 percent a year for ten years, as the roughly $20 billion backlog converts and Building Automation, whose segment profit rose from $1.53 billion to $1.95 billion between 2023 and 2025, keeps pricing; level through year 30. The business is worth about $155 a share, it owes about $31, leaving about $123. The bear case includes a full downturn of the kind the company has just lived through. Industrial Automation segment profit fell 21 percent from 2023 to 2025 (from $2.21 billion to $1.74 billion) as warehouse automation and distributor destocking unwound, and Process Automation margins fell 180 basis points in the latest quarter on weak catalyst volumes. We apply a slide of that depth and more to the whole company: cash earnings down 12 percent in year one, 24 percent in year two and 30 percent by year three, held there for a year, then recovering only to 85 percent of today's level by year nine and staying there through year 25, with no refinancing credit on the debt. The trough earnings of about $1.8 billion still cover the roughly $0.7 billion interest bill, and $5.3 billion of debt due within a year is covered by the surplus cash. The business is worth about $81 a share, it owes about $36, leaving about $45. WHAT COULD MAKE US WRONG. The biggest uncertainty is the allocation of cash flow between automation and aerospace: if automation's true cash conversion is 15 percent lower than we estimate, base value falls to roughly $67 a share, because the debt does not shrink with the earnings. Middle East disruption already cost some revenue in the first half of 2026; catalyst demand and Industrial Automation orders are the two lines to watch. The first annual report for the new company, expected in early 2027, will show whether our allocation holds. CHANGES SINCE THE PRIOR ANALYSIS (September 2026). The business moved on three facts: the Johnson Matthey acquisition closed, the two disposals were accelerated, and the June quarter showed Building Automation sales up 10 percent while Process Automation and Industrial Automation were flat to slightly lower. The earlier figures were built on a different basis (they did not deduct the roughly $11.5 billion of net debt and relied on management's margin targets), so the old and new values are not comparable. THE MARGIN-OF-SAFETY PRICE. We are fairly, not highly, sure of the earnings level: it is built from audited combined figures, an allocation we cannot yet audit, and a one-year-old cash conversion record. The worst plausible outcome is a repeat of the industrial downturn combined with a catalyst slump and unmitigated stranded costs while $18 billion of debt remains; the business and its cash would survive that, with equity worth roughly the bear figure, but a further goodwill write-off would not be surprising. If we are wrong on the allocation or on how fast earnings recover, shares could be worth $45 to $70. The price assumes a three-to-five-year holding period; over that period the business generates about $5.65 a share after interest, and pays a dividend of roughly $2.4 a share on the pre-spin rate (the post-spin rate is not yet set). The margin-of-safety price is $42 a share: from that price the bear case, with the cash earnings, implies roughly breaking even, and the base case implies well above 20 percent a year. The Quantinuum stake is an unvalued cushion beneath that price.