Honeywell International Inc. (NASDAQ:HON)

Over the five-year period examined, solvency ratios indicate a consistent and accelerating increase in financial leverage. This trend is observed across multiple metrics, suggesting a growing reliance on debt financing. While initial coverage ratios remain substantial, they demonstrate a clear downward trajectory, potentially signaling increasing risk.

Debt Ratios

The Debt to Equity ratio exhibits a steady climb from 1.06 in 2021 to 2.49 in 2025. Inclusion of operating lease liabilities results in a similar, though slightly elevated, increase, moving from 1.11 to 2.56 over the same period. Debt to Capital ratios, both with and without operating lease liabilities, also show consistent increases, rising from 0.51/0.53 to 0.71/0.72 respectively. Debt to Assets ratios follow the same pattern, increasing from 0.30/0.32 to 0.47/0.48. These increases suggest a growing proportion of assets are financed by debt.

Leverage Ratios

Financial Leverage, as measured by the ratio, increases significantly from 3.47 in 2021 to 5.30 in 2025. This indicates a substantial amplification of returns to equity through the use of debt, but also a corresponding increase in financial risk.

Coverage Ratios

Interest Coverage declines steadily from 22.09 in 2021 to 5.07 in 2025. Similarly, Fixed Charge Coverage decreases from 13.67 to 4.47 over the same timeframe. While these ratios remain positive, the downward trend suggests a diminishing ability to comfortably meet fixed financial obligations as debt levels rise. The rate of decline accelerates in later years.

In summary, the observed trends suggest a deliberate or necessary shift towards increased debt financing. While the company currently maintains adequate coverage of its fixed charges, the declining trend in coverage ratios warrants continued monitoring, particularly in conjunction with the increasing debt levels.

The debt to equity ratio exhibits a consistent upward trend over the five-year period. This indicates a growing reliance on debt financing relative to equity financing.

Debt to Equity Ratio Trend

In 2021, the debt to equity ratio stood at 1.06. This increased to 1.17 in 2022, and further to 1.29 in 2023. The rate of increase accelerated in subsequent years, reaching 1.67 in 2024 and culminating in a ratio of 2.49 in 2025.

The increase in the debt to equity ratio is driven by a combination of factors. Total debt increased from US$19,599 million in 2021 to US$34,580 million in 2025, representing a substantial increase in borrowing. Simultaneously, total Honeywell shareowners’ equity experienced fluctuations, decreasing from US$18,569 million in 2021 to US$13,904 million in 2025. This decline in equity contributes to the rising ratio.

Debt Component

Total debt demonstrates a generally increasing pattern. While a slight decrease was observed between 2021 and 2022, debt levels consistently rose thereafter, with a significant jump between 2023 and 2024.

Equity Component

Total Honeywell shareowners’ equity decreased from 2021 to 2023, before a modest increase in 2024. However, equity continued to decline in 2025, reaching its lowest point over the observed period. This reduction in equity base amplifies the impact of increasing debt on the debt to equity ratio.

The substantial increase in the debt to equity ratio in the later years of the period suggests a potentially higher level of financial risk. A higher ratio indicates that a greater proportion of the company’s financing is derived from debt, which can lead to increased interest expense and financial vulnerability during economic downturns.

The debt to equity ratio, including operating lease liability, demonstrates a consistent upward trend over the five-year period. Total debt has increased, while total shareowners’ equity has fluctuated, contributing to the increasing ratio.

Debt to Equity Ratio Trend

In 2021, the debt to equity ratio was 1.11. This increased to 1.23 in 2022, and further to 1.36 in 2023. A more substantial increase was observed in 2024, with the ratio reaching 1.73. The most significant change occurred between 2024 and 2025, with the ratio rising to 2.56.

Total Debt

Total debt, inclusive of operating lease liabilities, exhibited a generally increasing pattern. It decreased slightly from US$20,631 million in 2021 to US$20,537 million in 2022. However, it then rose to US$21,536 million in 2023, and experienced a considerable increase to US$32,225 million in 2024. This upward trend continued into 2025, reaching US$35,563 million.

Total Shareowners’ Equity

Total shareowners’ equity showed more volatility. It decreased from US$18,569 million in 2021 to US$16,697 million in 2022, and further declined to US$15,856 million in 2023. A recovery was seen in 2024, with equity increasing to US$18,619 million. However, equity decreased again in 2025, falling to US$13,904 million.

The combined effect of increasing debt and fluctuating, ultimately decreasing, equity has resulted in a significant rise in the debt to equity ratio. The ratio more than doubled between 2021 and 2025, indicating a greater reliance on debt financing relative to equity.

The debt to capital ratio exhibits a consistent upward trend over the five-year period. This indicates an increasing reliance on debt financing relative to equity and other capital sources.

Debt to Capital Ratio Trend

In 2021, the debt to capital ratio stood at 0.51. This ratio increased to 0.54 in 2022, and continued to rise to 0.56 in 2023. A more pronounced increase was observed between 2023 and 2024, with the ratio reaching 0.63. The most significant increase occurred between 2024 and 2025, culminating in a ratio of 0.71.

The increases in both total debt and total capital contribute to the rising ratio. However, the growth in total debt appears to be outpacing the growth in total capital, driving the overall upward trend. Total debt increased from US$19,599 million in 2021 to US$34,580 million in 2025, while total capital increased from US$38,168 million in 2021 to US$48,484 million in 2025.

Debt and Capital Amounts

Total debt experienced fluctuations, remaining relatively stable between 2021 and 2023 before substantial increases in 2024 and 2025. Total capital also increased over the period, though the rate of increase was less consistent than that of total debt, with a slight decrease observed between 2021 and 2022.

The increasing debt to capital ratio suggests a potentially higher level of financial risk. While a certain amount of debt can be beneficial for leveraging returns, a consistently rising ratio warrants further investigation into the company’s ability to service its debt obligations and maintain financial flexibility.

The debt to capital ratio, inclusive of operating lease liabilities, demonstrates a consistent upward trend over the five-year period. This indicates a growing reliance on debt financing relative to the company’s capital structure.

Total Debt (including operating lease liability)

Total debt exhibited a slight decrease from 2021 to 2022, followed by increases in 2023, and more substantial increases in both 2024 and 2025. The value rose from US$20,631 million in 2021 to US$35,563 million in 2025, representing a 72.5% increase over the period.

Total Capital (including operating lease liability)

Total capital decreased from 2021 to 2022, then remained relatively stable between 2022 and 2023. A significant increase occurred in 2024, followed by a slight decrease in 2025. The value moved from US$39,200 million in 2021 to US$49,467 million in 2025, a 26.1% increase overall.

Debt to Capital Ratio

The debt to capital ratio increased steadily from 0.53 in 2021 to 0.72 in 2025. This progression suggests that the proportion of debt financing used to fund the company’s assets and operations has increased over time. The most significant increase in the ratio occurred between 2023 and 2024, coinciding with a substantial rise in total debt.

The observed trend in the debt to capital ratio warrants further investigation to understand the underlying drivers of increased debt levels and their potential implications for the company’s financial flexibility and risk profile. The increasing ratio suggests a potentially higher level of financial leverage.

An increasing trend in the debt to assets ratio is observed over the five-year period. Initially, the ratio remained relatively stable, but experienced more significant increases in later years. This suggests a growing reliance on debt financing relative to the company’s asset base.

Debt to Assets Ratio - Overall Trend

The debt to assets ratio increased consistently from 0.30 in 2021 to 0.47 in 2025. This represents a 57% increase over the period. The most substantial increases occurred between 2022 and 2023 (a rise of 0.02) and between 2023 and 2024 (a rise of 0.08), indicating accelerating leverage.

Total debt exhibited an overall upward trajectory, increasing from US$19,599 million in 2021 to US$34,580 million in 2025. While there was a slight decrease in total debt between 2021 and 2022, it resumed an upward trend thereafter. Total assets also increased over the period, rising from US$64,470 million in 2021 to US$73,681 million in 2025, but the growth in debt outpaced the growth in assets, driving the observed increase in the debt to assets ratio.

Debt and Asset Values

Total debt increased by US$14,981 million over the five years. Total assets increased by US$9,211 million over the same period. The larger absolute increase in debt compared to assets contributed to the rising debt to assets ratio.

The increasing debt to assets ratio warrants further investigation. While some level of debt can be beneficial for growth, a consistently rising ratio may indicate increased financial risk and potential challenges in meeting future debt obligations. Continued monitoring of this ratio, alongside other solvency and profitability metrics, is recommended.

The debt to assets ratio, including operating lease liability, demonstrates a consistent upward trend over the five-year period. This indicates a growing reliance on debt financing relative to the company’s asset base.

Debt to Assets Ratio Trend

In 2021, the ratio stood at 0.32. It experienced a modest increase to 0.33 in 2022, and further to 0.35 in 2023. A more substantial increase is observed between 2023 and 2024, with the ratio rising to 0.43. This trend continues into 2025, reaching 0.48. This represents a 50% increase from the 2021 level.

The increase in the debt to assets ratio suggests that the company is financing a greater proportion of its assets with debt. While not inherently negative, this trend warrants further investigation into the reasons behind the increased leverage, including potential acquisitions, share repurchases, or operational investments. The company’s ability to service this debt and maintain financial flexibility should be closely monitored.

Total Debt and Total Assets

Total debt, including operating lease liability, increased from US$20,631 million in 2021 to US$35,563 million in 2025. Total assets also increased over the same period, moving from US$64,470 million to US$73,681 million. However, the growth in debt has outpaced the growth in assets, contributing to the rising debt to assets ratio.

The accelerating increase in the ratio during the latter part of the period suggests a more aggressive financing strategy or potentially a shift in capital structure. Continued monitoring of this ratio, alongside other solvency and liquidity metrics, is crucial for a comprehensive assessment of the company’s financial health.

An examination of the provided financial information reveals a consistent increase in financial leverage over the five-year period from 2021 to 2025. This trend is accompanied by fluctuations in total assets and shareowners’ equity.

Financial Leverage

The financial leverage ratio demonstrates a clear upward trajectory, increasing from 3.47 in 2021 to 5.30 in 2025. This indicates a growing reliance on debt financing relative to equity. The increase was gradual between 2021 and 2024, moving from 3.47 to 4.04, but accelerated significantly in 2025, reaching 5.30. This substantial jump suggests a considerable shift in the company’s capital structure during that year.

Total assets experienced a decrease from 64,470 in 2021 to 61,525 in 2023, before increasing to 75,196 in 2024 and subsequently decreasing to 73,681 in 2025. This suggests potential asset restructuring or acquisitions followed by a possible reduction in asset base.

Shareowners’ Equity

Total Honeywell shareowners’ equity generally declined from 2021 to 2025. It decreased from 18,569 in 2021 to a low of 15,856 in 2023. A recovery was observed in 2024, with equity rising to 18,619, but this was followed by a significant decrease to 13,904 in 2025. This decline in equity, coupled with the increasing financial leverage, reinforces the observation of a greater dependence on debt financing.

The combined effect of rising financial leverage and fluctuating, ultimately declining, shareowners’ equity suggests an increasing risk profile for the company. While the increase in total assets in 2024 may indicate growth, the subsequent decrease and the substantial rise in leverage in 2025 warrant further investigation to understand the underlying drivers and potential implications for financial stability.

The period under review demonstrates a consistent decline in interest coverage. While initially strong, the ability to meet interest obligations from earnings has diminished significantly over the five-year span.

Earnings before interest and tax (EBIT)

EBIT exhibited some fluctuation. It decreased from US$7,578 million in 2021 to US$6,793 million in 2022, then increased to US$7,924 million in 2023 and US$8,271 million in 2024. However, it concluded the period with a decrease to US$6,820 million in 2025. This suggests a degree of earnings volatility.

Interest and other financial charges

Interest expense increased steadily throughout the period. Beginning at US$343 million in 2021, it rose to US$414 million in 2022, US$765 million in 2023, US$1,058 million in 2024, and reached US$1,344 million in 2025. This consistent increase in interest expense is a primary driver of the declining interest coverage.

Interest coverage

The interest coverage ratio experienced a marked downward trend. Starting at 22.09 in 2021, it decreased to 16.41 in 2022, 10.36 in 2023, 7.82 in 2024, and further declined to 5.07 in 2025. This indicates a progressively reduced margin of safety in covering interest obligations with available earnings. A ratio below 1.5 would generally be considered concerning, suggesting potential difficulties in meeting interest payments.

The combination of fluctuating earnings and increasing interest expense has resulted in a substantial deterioration in the company’s ability to comfortably cover its interest obligations. The trend warrants further investigation into the factors driving both the earnings volatility and the rise in interest expense.

The company’s fixed charge coverage demonstrates a consistent decline over the five-year period examined. While initially strong, the ability to meet fixed obligations from earnings has diminished significantly. This trend warrants further investigation into the underlying drivers of both earnings and fixed charges.

Earnings Before Fixed Charges and Tax

Earnings before fixed charges and tax exhibited some volatility. A decrease was observed from 2021 to 2022, followed by an increase in 2023 and 2024. However, earnings declined notably in 2025, reaching the lowest level within the observed timeframe. This fluctuation in earnings contributes to the overall trend in fixed charge coverage.

Fixed Charges

Fixed charges increased steadily throughout the period. Beginning at US$571 million in 2021, they rose to US$1,579 million in 2025. This consistent increase in fixed obligations places greater pressure on earnings and contributes to the declining coverage ratio.

Fixed Charge Coverage Ratio

The fixed charge coverage ratio decreased from 13.67 in 2021 to 4.47 in 2025. This represents a substantial reduction in the company’s capacity to cover its fixed charges with its earnings. The ratio fell below 10 in 2023 and continued to decline in subsequent years, indicating a weakening solvency position. A ratio of 4.47 suggests a considerably reduced margin of safety for meeting fixed obligations.

The combined effect of fluctuating earnings and increasing fixed charges has resulted in a significant deterioration of the fixed charge coverage ratio. The trend suggests a growing risk associated with the company’s ability to service its fixed financial obligations.