Why Honeywell (HON) Could Be a Slippery Bet Right Now — and One Stock That Looks Stronger
Honeywell International (NYSE: HON) has been a steady performer, but steady doesn’t always mean safe. The stock currently trades at $212.68 per share, up about 8.3% over the last six months — roughly in line with the S&P 500’s 6.4% gain over the same period. On the surface, that looks like a solid hold. But a closer look at the company’s fundamentals reveals three growing concerns that have some analysts and investors questioning whether now is the right time to buy.
1. Organic Revenue Growth Is Underwhelming
Over the past two years, Honeywell’s organic revenue — which strips out the effects of acquisitions, divestitures, and currency fluctuations — has averaged just 4.6% annual growth. For a company of Honeywell’s scale and market position, that’s modest at best. “When a company with Honeywell’s resources can’t push organic growth past 5%, it raises questions about product competitiveness and market strategy,” says Mark Delaney, a portfolio manager at a Boston-based investment firm. “It’s not a red flag yet, but it’s a yellow one.”
2. Operating Margins Are Shrinking
Profitability is another area where Honeywell is losing ground. Its operating margin has dropped by 4 percentage points over the last five years, landing at 17% for the trailing twelve months. That decline is especially notable because revenue growth should typically help improve margins through fixed-cost leverage. “Margins going the wrong way when revenue is still growing? That’s a management red flag,” says Carla Mendez, a retail investor and former supply chain analyst. “It tells me they’re either spending inefficiently or losing pricing power.”
3. Return on Invested Capital Is Trending Down
Honeywell’s return on invested capital (ROIC) has also been slipping. While the company has historically been a strong capital allocator, the downward trend suggests fewer high-return opportunities are available. “ROIC is the ultimate test of a company’s ability to create value,” says Delaney. “When it’s falling, the market eventually takes notice.”
One Stock That Looks More Promising
Given these concerns, some analysts are looking beyond Honeywell toward a stock they believe offers better fundamentals at a more attractive valuation. While the article doesn’t name the specific pick, it points readers toward a semiconductor-focused play that has historically delivered strong returns. “I’d rather own a company with expanding margins and rising ROIC than one that’s coasting on past reputation,” says Mendez. “Honeywell feels like a legacy name that’s losing its edge.”
Honeywell currently trades at 20 times forward earnings — a valuation that, according to some analysts, already prices in a lot of optimism. For investors looking for market-beating returns, the message is clear: don’t settle for steady if it’s not backed by strong fundamentals.
This article is for informational purposes only and does not constitute investment advice.