Can Honeywell Technologies Boost Margin Performance Amid Cost Pressures?

Honeywell Technologies HON has been dealing with the adverse impacts of high operating costs and expenses. On a consolidated basis, the company’s total cost of sales, comprising the cost of products and services sold, was up 7.2% year over year to $6.07 billion in the second quarter of 2026.

Research and development expenses surged 14.2% year over year to $524 million, while interest and other financial charges increased 10.3% to $363 million in the same period. HON incurred high costs and expenses related to rising direct and indirect material costs and increased labor costs. For standalone Honeywell Technologies, operating margin declined 50 basis points to 12.8% in the second quarter. Escalating expenses, if not controlled, are likely to hurt the company’s bottom line in the quarters ahead.

However, with the separation of the Aerospace business, Honeywell Technologies started operating as a premier pure-play automation company in June 2026. Also, the company completed the divestiture of its warehouse and workflow solutions and productivity solutions and services businesses. These strategic initiatives, along with tailwinds from stranded costs elimination, are expected to support its margin performance and operational efficiency.

For 2026, Honeywell Technologies expects a segment margin of 20.1-20.5%, indicating an increase of 250-290 basis points on a year-over-year basis.

Peer’s Margin performance

Among its major peers, 3M Company MMM is facing cost pressure. In second-quarter 2026, its total costs increased 4.7% year over year to $3.82 billion, while the metric, as a percentage of total revenues, climbed 120 basis points to reach 58.7%. Research, development and related expenses increased 4.9% year over year to $302 million.

Emerson Electric Co.’s EMR cost of sales increased 2.7% year over year in the third quarter of fiscal 2026 (ended June 2026). Emerson’s selling, general and administrative expenses increased 6.1% year over year. Despite the increase in costs, Emerson’s adjusted segment EBITA margin improved 140 basis points to 28.5%, as price-cost actions and cost reductions offset inflationary impact.

The Zacks Rundown for HON

Shares of Honeywell Technologies have lost 12.2% in the past month compared with the industry’s decline of 0.7%.

Image Source: Zacks Investment Research

From a valuation standpoint, HON is trading at a forward price-to-earnings ratio of 22.85X, above the industry average of 15.48X. HON carries a Value Score of F.

Image Source: Zacks Investment Research

The Zacks Consensus Estimate for Honeywell Technologies’ earnings for 2026 and 2027 has declined in the past 60 days.

Image Source: Zacks Investment Research

HON stock currently carries a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Zacks' Research Chief Names "Stock Most Likely to Double"

Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.

This top pick is a little-known satellite-based communications firm. Space is projected to become a trillion dollar industry, and this company's customer base is growing fast. Analysts have forecasted a major revenue breakout in 2025. Of course, all our elite picks aren't winners but this one could far surpass earlier Zacks' Stocks Set to Double like Hims & Hers Health, which shot up +209%.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

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

Zacks Investment Research