Honeywell International Inc. HON has failed to impress investors with its recent operational performance due to weakness across its businesses, high long-term debt and escalating operational expenses.

Based in Charlotte, NC, Honeywell’s diversified portfolio of solutions serves customers globally with aerospace products and services, energy efficient products and solutions for businesses, and process technology, specialty chemicals, and electronic and advanced materials for refining and petrochemicals.

Let’s discuss the factors that continue taking a toll on the firm.

Factors Affecting Honeywell

Business Weakness: Persistent weakness in the warehouse and workflow solutions businesses due to lower demand for projects has been affecting the Industrial Automation segment's performance. The soft demand for its products and solutions within the sensing and safety technologies business is worrisome. Weakness in the warehouse automation business, owing to lower investments in the market, also remains a concern for the segment. For 2025, Honeywell anticipates that the Industrial Automation segment’s organic sales to decline in the low single digits.

High Long-Term Debt: Exiting 2024, the company’s long-term debt was $25.48 billion, significantly higher than $16.56 billion at 2023-end. The increase in its debt level was primarily attributable to the funds raised for the Civitanavi Systems, CAES, Global Access Solutions and LNG acquisitions. Considering its high debt level, its cash and cash equivalents of $10.6 billion do not look impressive. Also, interest expenses and other financial charges in the fourth quarter of 2024 remained high at $291 million, reflecting an increase of 44.1% year over year. High debt levels can increase its financial obligations and prove detrimental to profitability in the quarters ahead.

Rising Operating Expenses: Honeywell has been dealing with the adverse impacts of the high cost of sales and operating expenses. In 2024, its cost of sales rose 3.7% year over year to $23.8 billion, while selling, general and administrative expenses increased 6.6% to $5.5 billion. The company incurred high costs and expenses related to investment in digital infrastructure and business integration activities. Escalating expenses if not controlled are likely to hurt the bottom line in the quarters ahead.

HON Stock’s Price Performance

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Year to date, the Zacks Rank #4 (Sell) company’s shares have lost 5.3% against the industry’s 0.8% growth.

Foreign Exchange Headwinds: Given HON’s extensive presence, its businesses are exposed to the risk of adverse currency fluctuations. For instance, foreign exchange had an adverse impact of 1%, each on the Industrial Automation and Energy and Sustainability Solutions segment’s sales in the fourth quarter of 2024.

Downward Estimate Revisions: In the past 30 days, the Zacks Consensus Estimate for the company’s 2025 earnings per share has trended down from $10.70 per share to $10.34 on five downward estimate revisions against none upward. The consensus estimate for 2026 earnings per share decreased from $11.57 per share to $11.21 on three downward estimate revisions against none upward.

Key Picks

Some better-ranked stocks from the same space are discussed below.

The Middleby Corporation MIDD presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. 

It has a trailing four-quarter earnings surprise of 1.9%, on average. The consensus estimate for MIDD’s 2025 earnings has inched up 0.8% in the past 60 days.

Griffon Corporation GFF currently carries a Zacks Rank of 2. GFF delivered a trailing four-quarter average earnings surprise of 14.7%. In the past 60 days, the Zacks Consensus Estimate for Griffon’s fiscal 2025 (ending September 2025) earnings has increased 3.1%.

Applied Industrial Technologies, Inc. AIT presently carries a Zacks Rank of 2. It has a trailing four-quarter average earnings surprise of 5.3%. The Zacks Consensus Estimate for AIT’s fiscal 2025 (ending June 2025) earnings has improved 1.4% in the past 60 days.

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Honeywell International Inc. (HON) : Free Stock Analysis Report

Applied Industrial Technologies, Inc. (AIT) : Free Stock Analysis Report

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Griffon Corporation (GFF) : Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

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