Honeywell vs. Rockwell: A Comparative Financial Outlook

The report compares Honeywell and Rockwell Automation stocks, highlighting Honeywell's profitability and anticipated revenue growth, despite Rockwell's superior revenue growth rate. Investors may find Honeywell a preferable choice for the next three years.

Date: 12-09-2024

AI Rating: 6

Stock Performance Overview

Honeywell (HON) has shown stagnation in stock price, hovering around $200 since January 2021, whereas Rockwell (ROK) has increased by about 10%. When compared to the S&P 500's 45% surge, both stocks underperformed, suggesting diminished investor confidence in their growth.

Revenue Growth Analysis

Honeywell's revenue grew at an average annual rate of 4%, from $32.6 billion in 2020 to $36.7 billion in 2023, while Rockwell's sales exhibited better performance with a 13% annual growth rate, escalating from $6.3 billion to $9.1 billion.

In the last twelve months, Honeywell achieved 3.3% sales growth compared to 2% for Rockwell. However, despite Rockwell's superior historical growth, analysts forecast mid-single-digit growth for Honeywell in the upcoming three years, driven by demand for its aerospace segment. Conversely, Rockwell is expected to experience flat revenues due to declining sales offsetting future growth expectations.

Profitability Metrics

Honeywell's operating margin increased slightly from 20.4% in 2020 to 20.6% in 2023. In contrast, Rockwell's margin enhanced from 17.6% to 18.7% during the same period. Honeywell's last twelve-month margin of 21% clearly outperforms Rockwell's 17.2%, indicating greater efficiency in Honeywell's operations despite Rockwell's cost-saving initiatives.

Financial Risk Comparison

Both firms are comparable in financial risk, though Honeywell carries a higher debt-to-equity ratio (22%) compared to Rockwell's 14%. Still, Honeywell's cash position is more favorable, providing a cash cushion of 14% of its assets, unlike Rockwell's 4%.

Conclusion

Despite Rockwell’s stronger revenue growth, Honeywell's forecast of improved profitability and revenue growth rates makes it a more appealing investment choice for the next three years. Honeywell's estimated share price valuation suggests significant upside potential, whereas Rockwell may not offer similar growth prospects.

Stocks: HON ROK