Honeywell International (HON) just got hit with the kind of analyst note that makes investors wince. Bank of America Securities analyst Andrew Obin downgraded the industrial conglomerate from Buy to Underperform and chopped the price target from $265 down to $205. That's not a trim—that's a haircut.

The Split That's Raising Eyebrows

Here's what's driving the pessimism: Honeywell is planning to split itself into two separate entities—Honeywell Aerospace and Honeywell Automation—sometime in the second half of 2026. On paper, corporate simplifications like this often unlock value by giving each business sharper focus and clearer priorities. But Obin isn't buying the optimism just yet.

The analyst points out that the path to actually realizing this potential catalyst looks pretty rocky. For starters, the recent Solstice spin didn't exactly inspire confidence, and the current Aerospace CEO appointment disappointed some investors who were hoping for an external hire to shake things up.

Growth Gap Getting Wider

The numbers tell a sobering story. Honeywell's earnings per share growth continues to trail its peers by a meaningful margin. The analyst projects roughly 7% year-over-year EPS growth for 2026, compared to 13% for comparable companies. That's nearly half the pace.

Margins aren't helping either. EBITDA margins peaked at 25.9% back in 2023 but are expected to slip to 25.0% in 2025, landing slightly below the peer average of 25.2%. The Aerospace division shoulders most of the blame for this decline.

While contract repricing might provide some relief in 2026 and 2027, Obin believes ongoing research and development spending plus necessary reinvestment will likely keep a lid on any significant margin expansion. The analyst lowered EPS estimates to $10.61 for 2026 (down from $10.92) and $11.48 for 2027 (down from $11.66).

Recent Performance Paints Mixed Picture

Last month, Honeywell reported third-quarter 2025 adjusted earnings of $2.82 per share, beating analyst estimates of $2.57, with revenue of $10.41 billion topping expectations of $10.14 billion.

The company raised its 2025 adjusted EPS guidance to $10.60-$10.70 from $10.45-$10.65, ahead of the $10.54 consensus. But there was a catch: Honeywell lowered its full-year sales outlook to $40.7 billion-$40.9 billion from $40.8 billion-$41.3 billion, versus consensus of $40.84 billion.

Price Action: HON shares were down 1.91% at $192.37 at last check on Tuesday.