Honeywell and Bombardier: A Win-Win for Advanced Aviation

In a strategic move that signals optimism for the future of aviation, Honeywell International Inc. (HON) has signed a landmark agreement with Bombardier, a global leader in aviation and business jets. The collaboration, valued at $17 billion over its life, focuses on co-innovating next-generation technologies such as Anthem avionics and engines, positioning both companies at the forefront of the global business aviation market.

The partnership, announced on December 2, 2024, will enable a host of high-value upgrades for the installed Bombardier operator base and lay innovative foundations for future aircraft. By investing in these key technologies, Honeywell aims to drive substantial growth for both companies, leading the industry further into the future of aviation. The resolution of legacy litigation between the two companies is expected to facilitate this collaboration, enabling them to work together seamlessly and generate significant value for Bombardier's operator base.

While the commercial agreement impacts Honeywell's near-term financials, the company remains confident that it will lead to long-term value creation for shareholders. As a result of the partnership, Honeywell has updated its full-year sales, segment margin, adjusted earnings per share, and free cash flow guidance for 2024. Despite the impact on short-term financials, this strategic alliance is expected to drive growth and strengthen Honeywell's competitive position in the long run.

Honeywell's strategic agreement with Bombardier presents significant growth opportunities in aftermarket offerings and new technologies, with an estimated value of $17 billion over its life. The collaboration will enable high-value upgrades for the installed Bombardier operator base, including Honeywell avionics, propulsion, and satellite communications technologies. Key growth areas include advanced Anthem avionics and next-generation engines like the HTF7K.

The potential increase in revenue and market share from this partnership is likely to impact Honeywell's stock price and valuation multiples, such as P/E ratio and EV/EBITDA. Assuming a constant P/E ratio of 25, a $17 billion increase in revenue could result in a stock price increase of approximately $16 per share, assuming the company maintains its current market capitalization of $120 billion. Furthermore, the agreement could improve Honeywell's EV/EBITDA multiple, reflecting the increased value of the company's earnings and cash flows.

The key factors affecting the timing and realization of this $17 billion opportunity include market demand, regulatory approvals, and technological advancements. As operators seek to upgrade their existing fleets and integrate new technologies into future aircraft, the demand for advanced aviation technology is expected to grow. Regulatory approvals for new avionics, propulsion, and satellite communication systems will play a crucial role in the timeline, as these systems must meet stringent safety and performance standards. Technological advancements, such as the development of Honeywell's Anthem avionics and next-generation engines, will also be vital in realizing the full potential of this partnership.



Despite the slight reduction in 2024 guidance, Honeywell's strategic agreement with Bombardier positions the company for long-term growth. By leveraging its expertise in advanced avionics, propulsion, and satellite communications technologies, Honeywell is well-positioned to capitalize on the growing global business aviation market. Investors should monitor the progress of this partnership and consider the potential long-term benefits it may bring to Honeywell's growth and valuation.