UBS analyst Damian Karas upgraded Honeywell to Neutral from Sell with a price target of $215, up from $175. The stock’s valuation has fully reset and downside risk is now diminished, the analyst tells investors in a research note. The firm says that since peaking at a 40% premium in late 2022, Honeywell’s relative price-to-earnings ratio versus the S&P 500 has de-rated to a mid-single-digit discount, below the company’s historical 5-10% premium, reflecting its “underwhelming” organic sales growth in recent years and near-term concerns on guidance. UBS thinks improving short cycle demand and warehouse funnel conversion in the second half of 2024 should ease concerns and provide for a more favorable exit rate into fiscal 2025.
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