Is Honeywell (HON) Stock a Buy Ahead of Thursday Earnings?

TLDR

• Honeywell reports Q2 earnings Thursday before market open, its first as a pure-play automation company after spinning off its aerospace division
• Analysts expect EPS of $2.51 on revenue of $9.55 billion — both down ~7.7% year-over-year
• Last quarter Honeywell missed EPS estimates by 44.6%, with actual EPS of $2.57 vs. the $4.64 consensus
• EPS estimates have dropped 62.6% over the past 60 days, largely due to model resets following the aerospace spin-off
• Options traders are pricing in a ~4.4% move post-earnings, with an expected range of roughly $221.80 to $242.08

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Honeywell International reports second-quarter earnings Thursday morning, and the stakes are unusually high. This is the first earnings report since the company completed its transformation into a pure-play automation company after spinning off Honeywell Aerospace Technologies.

HON stock was trading near $231.94 heading into the report.

Honeywell International Inc., HON

Analysts are expecting EPS of $2.51 and revenue of $9.55 billion. Both figures represent year-over-year declines of about 7.7%. Sequentially, though, revenue is expected to grow 4.5% from the $9.14 billion posted last quarter.

Last quarter was rough. Honeywell missed EPS estimates by 44.6%, posting $2.57 against a $4.64 consensus. Revenue also came in 1.5% below expectations. It was a painful quarter, and the bar for Thursday is different — but not necessarily lower.

It’s worth noting that the estimate collapse — EPS forecasts down 62.6% in 60 days, revenue estimates down 47.4% — largely reflects analysts recalibrating models after the aerospace spin-off, not a fundamental deterioration in the business.

Honeywell also closed its acquisition of Johnson Matthey’s Catalyst Technologies business for £1.325 billion on July 17, just six days before this earnings release. Investors will want early color on how that integrates.

What Analysts Are Watching

The company now runs three automation businesses: Building Automation, Industrial Automation, and Process Automation & Technology. Building Automation is widely viewed as the standout. Analysts have pointed to it as a proof point that the new playbook can be replicated across the rest of the portfolio.

Process Automation & Technology is getting more scrutiny. Honeywell has exposure to softer oil and gas markets outside of LNG, and management is targeting 4%-to-6% revenue growth in markets that are only expanding at 3%-to-4%. That gap needs explaining.

Investors will also be watching Honeywell Forge, the company’s analytics platform. Management has leaned on it as a key growth driver, and Thursday will be a chance to show whether that narrative has legs.

Of the 24 analysts covering HON, 15 rate it a Buy, seven a Hold, and two a Sell. The consensus price target sits at $245.88, implying about 7% upside from current levels.

What the Options Market Is Saying

Options traders are pricing in a move of about $10.14 per share following the report, based on July 24 contracts. That works out to a roughly 4.4% implied move, putting the expected post-earnings range between $221.80 and $242.08.

Trading activity near the current price leans slightly defensive. At the $232.50 strike, puts are trading at $5.40 versus $4.74 for calls. Put volume is running at 59 contracts versus 33 on the call side.

That said, call open interest picks up at higher strikes — around $237.50 and $240 — suggesting some traders are still positioned for upside.

HON trades at 18.4 times trailing earnings but 27.2 times forward estimates. The stock closed Tuesday at $229.86.