Honeywell Aerospace (HONA) shares fell 10.5% by 10:30 a.m. ET Thursday, despite beating Q3 expectations with earnings of $2.21 per share on more than $4.6 billion in sales, versus analyst forecasts of $1.86 per share. Sales rose only 2% year over year and net profit 1%, though commercial original equipment sales grew 7% on higher aircraft production, a segment that is its smallest. Commercial aftermarket sales grew 2%, while defense and space grew 1%. The company has won more than $20 billion in new contracts this year, a book-to-bill ratio of about 1.5x, but its annualized free cash flow is only about $2.6 billion. At 20x free cash flow, the article argues Honeywell needs to grow faster to justify its premium valuation.
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