Honeywell's Security Acquisition Will Augment Growth in 2024-25

Honeywell is one of the strongest multi-industry firms in operation today. We think the company has successfully pivoted to capture multiple ESG trends, including energy efficiency, emissions reduction, and e-commerce, among others. We predicate our long-term thesis on increased demand for warehouse automation solutions, despite tough 2023 comps; new digital offerings that promote data analytics in powerplants, as well as remote security management, and energy savings in building solutions; and the broader commercial aerospace recovery. Over the next five years, we think Honeywell is capable of mid-single-digit top-line growth, incremental operating margins in the high-20s to low-30s, between 9% and 10% adjusted EPS growth, and free cash flow margins in the midteens.