Honeywell stock (HON) fell 1.2% in early Tuesday trading after a sharp rating cut by Bank of America (BAC) analyst Andrew Obin. Analysts typically move ratings one step at a time, for example, from “Buy” to “Hold.” Obin skipped the middle step and went all the way from Buy to Sell. This surprising move came after Honeywell had previously been a top stock pick for him just months earlier in July. The analyst also lowered his price target on the stock significantly, from $265 to $205.
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Solstice Spinoff Fails to Unlock Shareholder Value
One key reason for the downgrade is the weak start for a company Honeywell recently spun off. Honeywell separated its refrigerants and materials business into a new company, Solstice Advanced Materials (SOLS). This move was meant to create value for shareholders by focusing the businesses.
Obin noted that “History suggests simplification creates value.” However, the path for Honeywell is proving “challenging.” Solstice shares traded above $50 in October but closed at $41.58 on Monday, failing to meet investor expectations. This slow start suggests the separation is not immediately boosting shareholder returns as hoped.
Slow Profit Growth Threatens Future Gains
The second major problem cited is limited growth for Honeywell’s core business in the near future. Obin sees “limited earnings growth in 2026.” This lack of expected profit growth gives investors little reason to buy the stock right now.
While Honeywell trades for a relatively low 19 times estimated earnings, compared to 43 times for GE Aerospace (GE) and 30 times for Rockwell Automation (ROK), this discount is justified if Honeywell cannot grow its profits.
Its stock performance has lagged badly this year, down about 8%, while rivals GE Aerospace were up about 80% and Rockwell Automation were up about 30% coming into Tuesday trading. The downgrade serves as a warning to investors expecting Honeywell to trade higher simply to match the rich valuations of its competitors.
Majority of Analysts Still Favor a “Buy” Rating
Despite the harsh downgrade, the market opinion remains cautiously optimistic. Based on the 13 analyst ratings provided in the last three months, the consensus rating for Honeywell remains a “Moderate Buy.” A total of eight analysts recommend a Buy, while five suggest a Hold, and zero analysts other than the one noted in the previous section recommend a Sell.
The average 12-month HON price target among these experts is $247.58, which suggests a potential upside of over 28% from the current price.
This shows that many experts still believe in the company’s long-term value, even as the path to growth looks difficult.
