Analyst Note
| Joshua Aguilar |After reviewing our long-term assumptions and speaking with company representatives, we reduce our Honeywell fair value estimate by 4%. Our revised fair value estimate sits at $226 as we head into fourth-quarter earnings. The primary driver of the reduction relates to the macro uncertainty in 2023. Consequently, we significantly curtailed our sales expectations this year, but fourth-quarter 2022 remains unaffected. We also significantly curtailed our expectations for margin expansion in 2023, commensurate with the reduced operating leverage. This reduced our five-year sales CAGR by just shy of 1% and our midcycle operating margin by just over 1%. Nonetheless, we think the company remains one of the highest quality multi-industrial firms under our coverage, and we retain our wide moat and Exemplary capital allocation ratings.