Lear (NYSE:LEA) and Honeywell International (NYSE:HON) are both auto/tires/trucks companies, but which is the superior business? We will contrast the two businesses based on the strength of their earnings, profitability, institutional ownership, valuation, dividends, analyst recommendations and risk.

Dividends

Lear pays an annual dividend of $3.00 per share and has a dividend yield of 2.2%. Honeywell International pays an annual dividend of $3.28 per share and has a dividend yield of 1.9%. Lear pays out 16.5% of its earnings in the form of a dividend. Honeywell International pays out 40.9% 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. Lear has increased its dividend for 8 consecutive years and Honeywell International has increased its dividend for 8 consecutive years. Lear is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

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

Net Margins Return on Equity Return on Assets
Lear 4.94% 25.28% 9.23%
Honeywell International 16.73% 32.46% 10.02%

Analyst Recommendations

This is a breakdown of recent ratings for Lear and Honeywell International, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Lear 0 4 11 0 2.73
Honeywell International 0 3 11 1 2.87

Lear currently has a consensus target price of $175.08, indicating a potential upside of 27.09%. Honeywell International has a consensus target price of $175.25, indicating a potential upside of 0.54%. Given Lear’s higher probable upside, analysts plainly believe Lear is more favorable than Honeywell International.

Institutional and Insider Ownership

89.2% of Lear shares are owned by institutional investors. Comparatively, 75.7% of Honeywell International shares are owned by institutional investors. 0.4% of Lear shares are owned by company insiders. Comparatively, 0.7% of Honeywell International shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Volatility and Risk

Lear has a beta of 1.41, suggesting that its stock price is 41% more volatile than the S&P 500. Comparatively, Honeywell International has a beta of 1.11, suggesting that its stock price is 11% more volatile than the S&P 500.

Earnings & Valuation

This table compares Lear and Honeywell International’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Lear $21.15 billion 0.41 $1.15 billion $18.22 7.56
Honeywell International $41.80 billion 3.03 $6.77 billion $8.01 21.76

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

Summary

Honeywell International beats Lear on 10 of the 16 factors compared between the two stocks.

About Lear

Lear Corporation designs, develops, engineers, manufactures, assembles, and supplies automotive seating, and electrical distribution systems and related components for automotive original equipment manufacturers worldwide. It operates in two segments, Seating and E-Systems. The Seating segment offers leather and fabric products, seat trim covers, recliner mechanisms, seat tracks and foams, seat structures and mechanisms, and headrests for automobiles and light trucks, compact cars, and sport utility vehicles; and heating and cooling systems. The E-Systems segment offers electrical distribution systems that route electrical signals and manage electrical power within the vehicle for traditional vehicle architectures, as well as high power and hybrid electric systems. This segment's products comprise wire harnesses, terminals and connectors, and junction boxes; and electronic control modules, such as body control modules, smart junction boxes, gateway and wireless control modules, lighting control modules, and audio domain controllers and amplifiers. It also provides electrification products comprising charging systems that include onboard charging modules, cord set charging equipment, and wireless charging systems; battery electronics, which comprise battery disconnect units, cell monitoring supervisory systems, and integrated total battery control modules; and other power management modules, including converter and inverter systems. In addition, this segment offers cybersecurity software; EXO advanced vehicle positioning for automated and autonomous driving applications; roadside modules that communicate real-time traffic information; and cellular protocols for vehicle connectivity, as well as Connexus connectivity products. Further, it provides wireless systems, such as passive entry, remote keyless entry, and dual range/function remote keyless entry systems. The company was founded in 1917 and is headquartered in Southfield, Michigan.

About Honeywell International

Honeywell International Inc. operates as a diversified technology and manufacturing company worldwide. Its Aerospace segment supplies products, software, and services for aircrafts and vehicles. This segment offers auxiliary power units, propulsion engines, integrated avionics, environmental control and electric power systems, engine controls, flight safety, communications, navigation hardware, data and software applications, radar and surveillance systems, aircraft lighting, advanced systems and instruments, satellite and space components, and aircraft wheels and brakes; spare parts; repair, overhaul, and maintenance services; and connected solutions and data services for the aftermarket, as well as provides wireless connectivity and management and technical services. The company's Honeywell Building Technologies segment offers products, software, solutions, and technologies, such as sensors, switches, control systems and instruments for energy management; access control; video surveillance; fire products; remote patient monitoring systems; advanced software applications; and installation, maintenance and upgrades of systems. Its Performance Materials and Technologies segment develops and manufactures process technology products, including catalysts and adsorbents, equipment, and consulting services. The company's Safety and Productivity Solutions segment provides products, software, and connected solutions. Its safety products comprise personal protection equipment, apparel, gear, and footwear; gas detection technology; and cloud-based notification and emergency messaging. This segment's productivity solutions products and services include mobile devices and software; supply chain and warehouse automation equipment, software and solutions; custom-engineered sensors, switches, and controls; and software-based data and asset management productivity solutions. Honeywell International Inc. was incorporated in 1985 and is based in Morris Plains, New Jersey.

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