UBS Analyst Highlights Honeywell and Peers as Top Stock Picks

UBS analyst Amit Mehrotra has recently included Honeywell International (NASDAQ: HON) among his “top picks,” which also features Johnson Controls (NYSE: JCI) and 3M (NYSE: MMM). The analyst suggests that all three companies have strong potential to outperform in the current market. Investors should consider these opportunities.

Honeywell International: Short- and Long-term Prospects

Honeywell is well-positioned for both near- and long-term success. Following its first-quarter earnings, the company increased the midpoint of its full-year guidance based on strong performance. This guidance also factors in the impact of existing tariffs.

Notably, Honeywell’s aerospace segment is experiencing growth reliant on increased aircraft production, rising flight departures, and advancements in building automation. CFO Mike Stepniak highlighted on the earnings call that the company has seen “a second consecutive quarter of above double-digit growth in Building Solutions and mid-single-digit growth in Building Products.”

However, challenges exist in the industrial automation sector, where customer concerns regarding tariffs have created some pain points. Despite this, Honeywell’s forecast for 2% to 5% organic sales growth for the full year remains solid under current conditions.

Image source: Getty Images.

Looking ahead, Honeywell plans to split into three distinct divisions, which may enhance capital-raising efforts and provide a clearer investment opportunity. In particular, Honeywell Aerospace stands to benefit from a more focused strategic approach as management seeks to leverage emerging digital technologies in industrial and building automation.

Johnson Controls: An Undervalued Investment

Honeywell competes with Johnson Controls in the building automation space, so its strong performance is a positive indicator for Johnson Controls. Recently, Johnson Controls released its fiscal second-quarter 2025 earnings results, showing 7% organic sales growth for the period ending March 31. The company raised its full-year earnings guidance to $3.60 from an earlier range of $3.50 to $3.60.

Moreover, a 5% increase in orders boosted Johnson Controls’ backlog to $14 billion. Ongoing growth in installed equipment and services, driven by the integration of digital technology, underpins this success.

Data source: Johnson Controls presentation. Chart by author.

Long-term growth drivers include the adoption of Johnson Controls’ OpenBlue suite, which utilizes AI and digital twins to improve building efficiency and help owners achieve net-zero emissions goals. Additionally, their heating, ventilation, and air conditioning systems are positioned to capitalize on demand from data centers, aligning with trends in AI and data spending.

3M: A Focus on Renewed Growth

Since the appointment of CEO Bill Brown in May 2024, 3M has begun to improve after a period of underperformance. The company faced challenges from ongoing legal issues and a struggling healthcare segment, which has since been spun off as Solventum.

With Solventum divested, 3M is now focusing on rejuvenating its core industrial and consumer businesses. Early results are promising, with Brown leading efforts in new product introductions and operational efficiency improvements. Despite a softening market in 2025, management is on track for low-end organic sales growth of 2% to 3% this year.

While this outcome is not ideal, operational gains have improved the operating margin to 23.5% in the first quarter, up from 21.3% during the same timeframe last year.

If the tariff situation improves, 3M could benefit from multiple positive factors: improved market conditions, reduced tariff impacts, and strengthened earnings due to enhanced margins. This scenario presents a favorable risk/reward profile for investors.

Considering Honeywell International for Your Investment?

Before investing in Honeywell International, potential buyers should weigh the following:

The Motley Fool’s analyst team has recently identified what they believe are the top 10 stocks for investors right now, and Honeywell International is not on that list. Stocks that made their cut possess strong potential for future returns.

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Lee Samaha holds no positions in the stocks mentioned. The Motley Fool has positions in and recommends 3M and Johnson Controls International.

The viewpoints expressed in this article are those of the author and do not necessarily represent those of Nasdaq, Inc.