Is HON a good stock to buy? We came across a bullish thesis on Honeywell International Inc. on Astute Optics – US’s Substack. In this article, we will summarize the bulls’ thesis on HON. Honeywell International Inc.’s share was trading at $214.73 as of October 21st 2026. HON’s trailing and forward P/E were 8.17 and 22.22 respectively according to Yahoo Finance.
This isn’t the first time we see an industrial company pitched as a great investment. HON shares gained 5% year to date. Comparable stocks like Eaton and Emerson Electric gained 23.68% and 22.90%, respectively, during the same period. HON’s smaller gain may partly reflect weakness in its Process Automation and Technology business, where lower catalyst volumes weighed on sales and margins in the second quarter. Does HON’s underperformance leave room for it to catch up, or are investors right to remain cautious?
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In July, we published an article about the 12 Best Dividend Stocks to Invest In According to Jim Simons’ Renaissance Technologies and HON ranked #12 in that article. While HON has edged slightly lower since then, the #1 stock in that list returned 22.16% over the same period. So, hedge funds were right about their #1 pick, while HON’s performance has been more subdued. This article explains why hedge funds were bullish on HON. Before getting into our analysis, let’s take a look at the business and why some investors like the stock so much.
Honeywell International Inc. (NASDAQ:HON) provides industrial automation, building automation, and energy and sustainability solutions. Its investment story has changed after the separation of Solstice Advanced Materials and the spin-off of its Aerospace business, and that’s central to understanding the stock. Honeywell International Inc. is now aiming to become a leaner industrial technology company, but investors are still weighing whether it can grow faster while carrying more debt. Revenue over the past year came in at $38.1 billion, up 5.0%, with an operating margin of 18.8%.
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The reported net margin of 21.6% looks strong, but it was inflated by a one-time $6.6 billion gain from deconsolidating Quantinuum, so underlying profitability is lower than that headline number suggests. The stock trades at about 7.4 times trailing earnings and 20.3 times forward earnings, with the trailing figure skewed by that one-time gain. In short, the real question for investors is whether HON’s more focused automation business can grow earnings enough to justify its price, given its otherwise stable industrial profile.
The bullish case for Honeywell International Inc. rests on its automation platform benefiting from long-term trends like industrial digitization, smart buildings, energy efficiency, and infrastructure upgrades. Its products — industrial controls, sensors, building management systems, and process technologies through its UOP unit — are deeply embedded in how customers operate, making them hard to replace. This is backed by real numbers: the order backlog stood above $37 billion, though it still includes some Aerospace-related orders from before the spin-off, and annual free cash flow reached $5.4 billion after capital spending of $986 million. Bulls see this as evidence that the company can keep generating strong, durable cash flow as automation demand grows.
The recent portfolio changes bring both opportunity and risk. Honeywell International Inc. completed its Aerospace spin-off on June 29, 2026, leaving behind a company centered on industrial automation, building automation, and energy and sustainability. If this remaining business benefits from AI data center growth, manufacturing reshoring, and energy infrastructure spending, earnings could improve as customers upgrade to more advanced automation systems. But the company still has to prove it can grow enough on its own, without the Aerospace business that used to be a major contributor. You can check out whether Honeywell’s three separate businesses are worth more than the former whole here.
Analysts currently have an average price target of about $263.41 for Honeywell International Inc., nearly 30% above its current price of roughly $202.36. That target assumes the company can expand margins while keeping revenue growth steady. At around 20 times forward earnings, investors are effectively paying for a stable, cash-generative industrial technology company rather than a cheap, out-of-favor cyclical stock. With revenue growth at just 5.0%, the key thing to watch is whether earnings growth can pick up — if it doesn’t, the current valuation becomes harder to defend.
The biggest risk to this story is debt. A leaner, more focused Honeywell International Inc. should ideally come with a stronger balance sheet, but net debt still stands at $24.8 billion, with debt-to-equity near 183%. Gross margin, at 36.4%, is also below the peer average, and with revenue growth still moderate, it’s unclear whether automation and software can meaningfully improve profitability from here. Strong free cash flow helps cushion these concerns, but high debt paired with slower growth could cap how much upside is left in the stock.
Another risk for the stock is overhead costs remaining after the spin-offs. Separating businesses does not automatically remove the corporate staff, IT systems, and shared expenses that previously supported them. Honeywell previously targeted eliminating these stranded costs within 12–24 months after closing, showing that savings take time to achieve. The remaining automation business must spread those expenses across a smaller revenue base until they are removed. Delays could limit margin improvement even if customer demand stays healthy. Restructuring could also require additional cash spending before savings emerge. In our opinion, this could pressure Honeywell’s price multiples if a simpler portfolio fails to produce the leaner cost structure investors expect.
Hedge fund positioning shows a mixed signal. As per our database, 74 hedge funds held Honeywell International Inc. at the end of the second quarter, down slightly from 75 in the previous quarter, suggesting institutional investors stayed largely steady on the stock despite its debt and restructuring concerns.
Source: finance.yahoo.com — article syndicated from the publisher’s feed; all rights remain with the original publisher.
