Honeywell International (NASDAQ:HON – Get Free Report) and Federal Signal (NYSE:FSS – Get Free Report) are both multi-sector conglomerates companies, but which is the better investment? We will contrast the two companies based on the strength of their institutional ownership, dividends, earnings, risk, analyst recommendations, valuation and profitability.
Profitability
This table compares Honeywell International and Federal Signal’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Honeywell International | 15.07% | 38.11% | 8.81% |
| Federal Signal | 11.47% | 19.50% | 12.93% |
Insider and Institutional Ownership
75.9% of Honeywell International shares are held by institutional investors. Comparatively, 92.7% of Federal Signal shares are held by institutional investors. 0.2% of Honeywell International shares are held by company insiders. Comparatively, 3.3% of Federal Signal shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.
Analyst Ratings
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Honeywell International | 1 | 9 | 9 | 0 | 2.42 |
| Federal Signal | 0 | 4 | 2 | 0 | 2.33 |
Honeywell International presently has a consensus price target of $236.56, indicating a potential upside of 18.81%. Federal Signal has a consensus price target of $123.00, indicating a potential upside of 9.40%. Given Honeywell International’s stronger consensus rating and higher probable upside, analysts clearly believe Honeywell International is more favorable than Federal Signal.
Dividends
Honeywell International pays an annual dividend of $4.76 per share and has a dividend yield of 2.4%. Federal Signal pays an annual dividend of $0.56 per share and has a dividend yield of 0.5%. Honeywell International pays out 50.2% of its earnings in the form of a dividend. Federal Signal pays out 14.6% 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. Honeywell International has increased its dividend for 14 consecutive years and Federal Signal has increased its dividend for 3 consecutive years. Honeywell International is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
Earnings & Valuation
This table compares Honeywell International and Federal Signal”s gross revenue, earnings per share and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Honeywell International | $38.50 billion | 3.28 | $5.71 billion | $9.49 | 20.98 |
| Federal Signal | $1.86 billion | 3.67 | $216.30 million | $3.83 | 29.36 |
Honeywell International has higher revenue and earnings than Federal Signal. Honeywell International is trading at a lower price-to-earnings ratio than Federal Signal, indicating that it is currently the more affordable of the two stocks.
Volatility & Risk
Honeywell International has a beta of 0.96, indicating that its share price is 4% less volatile than the S&P 500. Comparatively, Federal Signal has a beta of 1.34, indicating that its share price is 34% more volatile than the S&P 500.
Summary
Honeywell International beats Federal Signal on 10 of the 17 factors compared between the two stocks.
About Honeywell International
Honeywell International Inc. engages in the aerospace technologies, building automation, energy and sustainable solutions, and industrial automation businesses in the United States, Europe, and internationally. The company’s Aerospace 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 thermal systems, as well as wireless connectivity services. Its Honeywell Building Technologies segment provides software applications for building control and optimization; sensors, switches, control systems, and instruments for energy management; access control; video surveillance; fire products; and installation, maintenance, and upgrades of systems. The company’s Performance Materials and Technologies segment offers automation control, instrumentation, and software and related services; catalysts and adsorbents, equipment, and consulting; and materials to manufacture end products, such as bullet-resistant armor, nylon, computer chips, and pharmaceutical packaging, as well as provides materials based on hydrofluoro-olefin technology. Its Safety and Productivity Solutions segment provides personal protective equipment, apparel, gear, and footwear; gas detection technology; custom-engineered sensors, switches, and controls for sensing and productivity solution; cloud-based notification and emergency messaging; mobile devices and software; custom-engineered sensors, switches, and controls; and data and asset management productivity solutions. Honeywell International Inc. was founded in 1885 and is headquartered in Charlotte, North Carolina.
About Federal Signal
Federal Signal Corp. engages in the design and manufacture of products and integrated solutions for municipal, governmental, industrial, and commercial customers. It operates through the Environmental Solutions Group and Safety and Security Systems Group segments. The Environment Solutions Group segment is involved in the manufacture and supply of street sweeper vehicles, sewer cleaners, vacuum loader trucks, hydro-excavation trucks, and water blasting equipment. The Safety and Security Systems Group segment offers comprehensive systems and products that law enforcement, fire rescue, emergency medical services, campuses, military facilities, and industrial sites use to protect people and property. The company was founded in 1901 and is headquartered in Oak Brook, IL.
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