Honeywell Rises 10% in a Year: How Should You Play the Stock?

Core Insights - Honeywell International Inc. (HON) has seen a stock price increase of 10% over the past year, outperforming the industry growth of 2.5% but lagging behind the S&P 500's increase of 20.5% [1] Stock Performance - The stock closed at $216.37, below its 52-week high of $242.77 and above its 52-week low of $179.36 [3] Factors Driving Performance - The commercial aviation aftermarket business is experiencing strong demand, with a 7% year-over-year sales increase in Q2 2025 [4] - The defense and space business saw a 13% year-over-year sales surge in Q2 2025, supported by stable defense spending and geopolitical demand [4] - The Aerospace Technologies segment is expected to benefit from strong demand in commercial aviation and increased defense spending [5] - The Building Automation segment is driven by solid demand from construction projects, particularly in North America, the Middle East, and India [5] - The Universal Oil Products business is benefiting from higher refining and petrochemicals projects [6] - Overall backlog increased by 10% to $36.6 billion, with projected sales for 2025 between $40.8 billion and $41.3 billion, indicating 4-5% organic growth [8][9] Shareholder Returns - Honeywell paid out $1.48 billion in dividends and repurchased $3.6 billion in shares in the first half of 2025 [10] - The quarterly dividend was increased by approximately 5% to $1.13 per share in September 2024 [10] - Expected free cash flow for 2025 is projected to be between $5.4 billion and $5.8 billion [10] Near-Term Concerns - The Industrial Automation segment faced a 5% year-over-year sales decline in Q2 2025, with expectations of low to mid-single digit organic sales decline for 2025 [11] - Long-term debt increased by 9.3% CAGR over the past five years, reaching $30.2 billion by the end of Q2 2025, primarily due to acquisition funding [12] - Interest expenses rose by 32% year-over-year to $330 million in Q2 2025, raising concerns about profitability [13] Valuation Metrics - Honeywell's forward 12-month P/E ratio is 19.63X, higher than the industry average of 16.33X [14] Earnings Estimates - The Zacks Consensus Estimate for Honeywell's 2025 earnings increased by 1.1% to $10.49 per share, indicating a 6.1% year-over-year growth [18]