Honeywell International Inc. (HON)

Enterprise Value to FCFF (EV/FCFF)

Difficulty: Intermediate

Honeywell International Inc., FCFF calculation

USD $ in millions

12 months ended	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
Net income attributable to Honeywell	6,765	1,655	4,809	4,768	4,239
Net income attributable to the noncontrolling interest	63	43	37	79	90
Net noncash charges	(680)	4,831	836	770	459
Changes in assets and liabilities, net of the effects of acquisitions and divestitures	286	(563)	(184)	(163)	236
Net cash provided by operating activities	6,434	5,966	5,498	5,454	5,024
Interest paid, net of amounts capitalized, net of tax¹	301	242	247	228	232
Expenditures for property, plant and equipment	(828)	(1,031)	(1,095)	(1,073)	(1,094)
Proceeds from disposals of property, plant and equipment	15	86	21	15	18
Free cash flow to the firm (FCFF)	5,922	5,263	4,671	4,624	4,180

Item	Description	The company
FCFF	Free cash flow to the firm is the cash flow available to the Honeywell International Inc.’s suppliers of capital after all operating expenses have been paid and necessary investments in working and fixed capital have been made.	Honeywell International Inc.’s FCFF increased from 2016 to 2017 and from 2017 to 2018.

Honeywell International Inc., interest paid, net of tax calculation

USD $ in millions

12 months ended	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
Effective Income Tax Rate (EITR)

EITR¹	14.60%	21.00%	24.80%	26.40%	25.60%
Interest Paid, Net of Tax
Interest paid, net of amounts capitalized, before tax	353	306	329	310	312
Less: Interest paid, net of amounts capitalized, tax²	52	64	82	82	80
Interest paid, net of amounts capitalized, net of tax	301	242	247	228	232

2018 Calculations

² Interest paid, net of amounts capitalized, tax = Interest paid, net of amounts capitalized × EITR
= 353 × 14.60% = 52

Honeywell International Inc., current EV/FCFF calculation, comparison to benchmarks

Selected Financial Data (USD $ in millions)
Enterprise value (EV)	118,184
Free cash flow to the firm (FCFF)	5,922
Ratio
EV/FCFF	19.96
Benchmarks
EV/FCFF, Competitors
3M Co.	25.73
Danaher Corp.	29.51
General Electric Co.	12.63
EV/FCFF, Sector
General Industrials	20.54
EV/FCFF, Industry
Industrials	24.84

If company EV/FCFF is lower then the EV/FCFF of benchmark then company is relatively undervalued.

Otherwise, if company EV/FCFF is higher then the EV/FCFF of benchmark then company is relatively overvalued.

Honeywell International Inc., historical EV/FCFF calculation, comparison to benchmarks

	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
Selected Financial Data (USD $ in millions)
Enterprise value (EV)¹	113,831	118,449	99,342	86,358	83,545
Free cash flow to the firm (FCFF)²	5,922	5,263	4,671	4,624	4,180
Ratio
EV/FCFF³	19.22	22.51	21.27	18.68	19.99
Benchmarks
EV/FCFF, Competitors
3M Co.	24.76	28.46	21.40	19.78	20.82
Danaher Corp.	–	25.94	26.16	21.88	19.11
General Electric Co.	–	15.66	35.71	42.38	17.37
EV/FCFF, Sector
General Industrials	–	22.13	29.18	25.19	18.53
EV/FCFF, Industry
Industrials	–	24.75	23.33	19.95	19.32

2018 Calculations

³ EV/FCFF = EV ÷ FCFF
= 113,831 ÷ 5,922 = 19.22

Ratio	Description	The company
EV/FCFF	Enterprise value to free cash flow to the firm is whole company valuation indicator.	Honeywell International Inc.’s EV/FCFF ratio increased from 2016 to 2017 but then declined significantly from 2017 to 2018.