Bank of America downgrades Honeywell, citing supply chain and inflation challenges
Bank of America downgraded shares of industrial conglomerate Honeywell as supply chain issues and inflationary pressures persist in the first half of 2022. The firm lowered its rating on Honeywell to neutral from buy. BofA also cut its price target on the stock to $245 from $270. The new projection still implies 18% upside from Honeywell's closing price Tuesday. Shares were off 1.6% in premarket trading. "There is a lot to like about Honeywell. ...However, HON is likely to face revenue & margin headwinds in 1H22," BofA's Andrew Obin said in a note Wednesday. Honeywell management said fourth-quarter revenue is trending lower due to supply chain challenges. "These are seen persisting in 1H22," Obin said. Higher costs are also expected to weigh on results next year, BofA said. "Honeywell has acted aggressively to combat inflation through pricing actions, dual-sourcing, and engineering re-design. However, these inflationary headwinds are likely to persist at least through 1H22," Obin said. Plus, BofA believes Honeywell is currently trading at a "premium valuation." However, the firm said, "our sum-of-the-parts analysis does not support further multiple expansion in the near-term." Shares of Honeywell have underperformed the market this year, down 2.6% in 2021 compared with the S & P 500's 24.8% gain. —CNBC's Michael Bloom contributed reporting.

Honeywell International Inc. signage is displayed on a monitor on the floor of the New York Stock Exchange (NYSE) in New York. Michael Nagle | Bloomberg | Getty Images