Financial Contrast: Honeywell (HON) versus BorgWarner (BWA)

Honeywell (NYSE: HON) and BorgWarner (NYSE:BWA) are both large-cap multi-sector conglomerates companies, but which is the superior stock? We will contrast the two companies based on the strength of their valuation, earnings, analyst recommendations, risk, dividends, institutional ownership and profitability.

Dividends

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Honeywell pays an annual dividend of $2.98 per share and has a dividend yield of 2.1%. BorgWarner pays an annual dividend of $0.68 per share and has a dividend yield of 1.3%. Honeywell pays out 41.9% of its earnings in the form of a dividend. BorgWarner pays out 17.5% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Honeywell has increased its dividend for 7 consecutive years and BorgWarner has increased its dividend for 3 consecutive years. Honeywell is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Risk & Volatility

Honeywell has a beta of 0.97, suggesting that its stock price is 3% less volatile than the S&P 500. Comparatively, BorgWarner has a beta of 1.81, suggesting that its stock price is 81% more volatile than the S&P 500.

Analyst Ratings

This is a summary of current ratings and price targets for Honeywell and BorgWarner, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Honeywell 0 2 12 0 2.86
BorgWarner 1 7 8 0 2.44

Honeywell currently has a consensus price target of $168.00, suggesting a potential upside of 17.70%. BorgWarner has a consensus price target of $53.75, suggesting a potential upside of 4.84%. Given Honeywell’s stronger consensus rating and higher probable upside, analysts plainly believe Honeywell is more favorable than BorgWarner.

Earnings & Valuation

This table compares Honeywell and BorgWarner’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Honeywell $40.53 billion 2.65 $1.66 billion $7.11 20.08
BorgWarner $9.80 billion 1.10 $439.90 million $3.89 13.18

Honeywell has higher revenue and earnings than BorgWarner. BorgWarner is trading at a lower price-to-earnings ratio than Honeywell, indicating that it is currently the more affordable of the two stocks.

Insider and Institutional Ownership

75.3% of Honeywell shares are held by institutional investors. Comparatively, 95.7% of BorgWarner shares are held by institutional investors. 1.3% of Honeywell shares are held by company insiders. Comparatively, 0.7% of BorgWarner shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Profitability

This table compares Honeywell and BorgWarner’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Honeywell 4.08% 27.27% 9.59%
BorgWarner 4.49% 21.92% 8.61%

Summary

Honeywell beats BorgWarner on 13 of the 17 factors compared between the two stocks.

About Honeywell

Honeywell International Inc. operates as a diversified technology and manufacturing company worldwide. It operates through four segments: Aerospace; Home and Building Technologies; Performance Materials and Technologies; and Safety and Productivity Solutions. The Aerospace segment supplies products, software, and services for aircraft and vehicles that it sells to original equipment manufacturers and other customers in various markets, including air transport, regional, business and general aviation aircraft, airlines, aircraft operators, defense and space contractors, and automotive and truck manufacturers. The Home and Building Technologies segment provides products, software, solutions, and technologies that help homes owners, commercial building owners, and occupants. The Performance Materials and Technologies segment develops and manufactures advanced materials, process technologies, and automation solutions. The Safety and Productivity Solutions segment provides products, software, and connected solutions to customers that enhance productivity, workplace safety, and asset performance. Honeywell International Inc. was founded in 1920 and is headquartered in Morris Plains, New Jersey.

About BorgWarner

BorgWarner Inc. provides solutions for combustion, hybrid, and electric vehicles worldwide. It operates through two segments, Engine and Drivetrain. The Engine segment develops and manufactures turbochargers; and timing systems, such as timing chains, variable cam timing products, crankshaft and camshaft sprockets, tensioners, guides and snubbers, front-wheel drive transmission chains, four-wheel drive chains for light vehicles, and hybrid power transmission chains. It also provides emissions systems, including electric air pumps and exhaust gas recirculation (EGR) modules, EGR coolers, EGR valves, glow plugs, and instant starting systems; turbocharger actuators; and thermal systems products comprising viscous fan drives, polymer fans, and coolant pumps. The Drivetrain segment develops and manufactures friction and mechanical products, including dual and friction clutch modules, friction and separator plates, transmission bands, torque converter and one-way clutches, and torsional vibration dampers. It also offers control products comprising electro-hydraulic solenoids, transmission solenoid modules, and dual clutch control modules; torque management products, such as rear-wheel drive/all-wheel drive (AWD) transfer case systems, front wheel drive-AWD coupling systems, and cross-axle coupling systems; starters, alternators, and hybrid electric motors; and motor controllers, battery chargers, and uninterrupted power source systems. The company sells its products to original equipment manufacturers of light vehicles consisting of passenger cars, sport-utility vehicles, vans, and light trucks; commercial vehicles, such as medium-duty and heavy-duty trucks, and buses; and off-highway vehicles, including agricultural and construction machinery, and marine applications, as well as to tier one vehicle systems suppliers and the aftermarket for light, commercial, and off-highway vehicles. BorgWarner Inc. was founded in 1987 and is headquartered in Auburn Hills, Michigan.

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