RBC: Honeywell's APU Portfolio Under-Appreciated by Investors

RBC Capital Markets analysts believe Honeywell Aerospace's (HONA) auxiliary power unit (APU) portfolio is under-appreciated by investors, according to a report from MT Newswires.

Analysis Details

Analysts noted that APUs, which provide power to aircraft while on the ground, are a significant segment of Honeywell Aerospace's business but are often overlooked by investors focused on other areas like engines and avionics.

Analyst Rationale

RBC sees strong competitive advantages in the APU portfolio, including long-term contracts with major aircraft manufacturers such as Boeing (BA) and Airbus, as well as growing demand from the defense sector. Profit margins in this segment are also attractive, making it an underappreciated investment opportunity.

Context

The recommendation comes amid a strong recovery in commercial aviation post-pandemic, with rising demand for new aircraft and maintenance services. Global defense spending is also increasing, boosting demand for military APUs.

What This Means for Investors

The report suggests investors may be overlooking the value of Honeywell's APU segment, creating an opportunity to capitalize on future growth in this area. However, investors should assess risks related to supply chains and regulatory challenges before making decisions.