Is Jim Cramer Right About Honeywell? Why This Contrarian Play Could Pay Off Big in 2025

Jim Cramer's persistent bullish stance on Honeywell International (HON) has long been a point of debate among investors. While the market remains skeptical—reflected in a lukewarm “Hold” consensus—this skepticism presents a rare contrarian opportunity. With Honeywell's undervalued position amid surging AI energy infrastructure demand and its strategic exposure to aerospace and industrial automation, now could be the moment to buy. Here's why.

The Contrarian Case: Why the Market's Scepticism Is Misplaced

The Street's hesitation is rooted in Honeywell's recent underperformance. Analysts cite challenges in its Industrial Automation segment, margin pressures in Aerospace, and a $138 billion market cap that some argue is too “fully valued.” Yet this misses the bigger picture: Honeywell is a cash-rich, high-margin machine with secular tailwinds few stocks can match.

Key Contrarian Metrics:
- Backlog Growth: Honeywell's $56.9 billion backlog (up 8% year-over-year) reflects strong demand for its energy-efficient solutions, from AI data centers to aerospace systems.
- Margin Resilience: Despite headwinds, Building Automation margins expanded to 26%—a testament to pricing power in green infrastructure.
- Dividend Stability: A 2.11% yield, backed by $5.69 billion in net income TTM, underscores Honeywell's financial fortress.

Cramer's focus on these fundamentals is spot-on. The market's fixation on short-term hiccups ignores Honeywell's long-term moat: its role as a critical supplier to AI's energy infrastructure.

Honeywell's Hidden Edge: The AI Energy Play

While investors chase overhyped AI stocks trading at 50x+ P/E ratios, Honeywell quietly profits from the real infrastructure fueling AI: energy.

AI data centers require massive power consumption—30% of global electricity by 2030, per McKinsey. Honeywell's energy solutions, from its Sundyne compressor acquisition (a $2.2B bet on clean energy systems) to its Building Automation software, are the unsung heroes of this transition.

Consider this:
- Sundyne: Supplies compressors for hydrogen fuel cells and renewable energy projects—directly tied to decarbonizing data centers.
- Building Automation: Controls HVAC systems in 80% of Fortune 500 data centers, reducing energy waste by up to 30%.

Meanwhile, overhyped AI stocks like Palantir (PLTR) or C3.ai (AI) trade at 30x+ forward P/Es with no proven revenue scale. Honeywell, by contrast, trades at 24.6x P/E—a steal for a company with 12% annual revenue growth and $2.9B in Q1 buybacks/dividends.

Aerospace and Automation: Two Pillars of Growth

Skeptics dismiss Honeywell's aerospace exposure, citing macroeconomic uncertainty. But here's the contrarian truth: Aerospace is a recovery lever, not a liability.

• Defense Tech: Honeywell's $2.2B in Q1 defense contracts (up 23% Y/Y) reflect rising global military spending. Its radar systems and engine components are irreplaceable in modern fighter jets.
• Commercial Aviation: Post-pandemic travel demand is driving aftermarket parts sales, which grew 9% in Q1.

Industrial Automation's struggles? They're temporary. Honeywell is already pivoting to high-margin segments like sensing technologies (used in autonomous vehicles and smart grids), which grew 7% in Q1 despite broader sector softness.

Hedge Funds Are Accumulating—Should You?

The data is clear: institutional investors are buying.

• Hedge Fund Sentiment: 7 of 10 analysts rate HON “Buy,” with UBS and Barclays targeting $268–$260—a 15–20% upside.
• Cramer's Track Record: In 2023, Cramer recommended HON at $160; it's now at $223—a 39% gain.

The contrarian edge here is timing. Honeywell's stock has dipped 10% from its May peak—a correction driven by macro fears, not fundamentals. This creates a buy point at a 10x earnings yield premium to tech peers.

Final Call: Buy Now Before the Crowd Catches On

Honeywell isn't a flashy AI stock. It's a steady, high-conviction play in two unstoppable trends: energy infrastructure for AI and aerospace resilience.

• Risk/Reward: A $237 price target (consensus) implies 6% upside immediately. If Honeywell's spin-off plan (splitting into three companies by 2026) unlocks value, the upside could be 20–30%.
• Contrarian Edge: Buy on dips below $220. Avoid chasing overhyped AI names—Honeywell's stability and dividends are your armor.

As Cramer often says, “Buy what the market hates, sell what it loves.” Today, Honeywell is hated. That's your signal to act.

Final Take: Honeywell is a rare stock that offers both defensive stability and secular growth. With AI's energy needs booming and aerospace recovering, now is the time to position. The market's skepticism is your advantage—don't let it pass.