3 "top picks" on Wall Street are now grand

UBS analyst Amit Mehrotra recently added Honeywell International ). In his "Preferred" list, it also includes industry Johnson Control (NYSE: JCI) and 3m (NYSE: Yes). All three have substantial potential to beat the win, and these stocks should be considered now.

In short, Honeywell has the potential to beat in close and long-term close matches. The company has reported in the first quarter, and management has raised the midpoint of its full-year guidance based on a range of outstanding results. In addition, the guide incorporates assumptions about current tariff levels.

It is particularly important to note that its aviation business benefits from the continuous upgrade of aircraft production, growth in flight departures and building automation. "Middle digit growth in building solutions and building products grew double digits for the second consecutive quarter," Chief Financial Officer Mike Stepniak said in a discussion of the latter. I'll go back to that when discussing Johnson Controls.

Areas of weakness, such as industrial automation, where customers react negatively to tariff uncertainty, but overall, the full-year outlook for Honeywell's organic sales growth of 2% to 5% in the current environment is positive.

Image source: Getty Images.

In the long run, Honeywell's business has the potential to rise from its upcoming breakup to three divisions. In particular, Honeywell Aerospace may benefit from improving capital capabilities and making more focused investment claims to investors. Honeywell Automation could benefit from a stricter strategic priorities as management hopes to take advantage of digital networking opportunities in the industrial and building automation sectors.

It's a compelling combination that makes Honeywell a great inventory for investors in recent years and in long term.

Honeywell competes with Johnson's control automation, and the strength of Honeywell's construction automation business is good for Johnson Controls. The company recently released its earnings results for the second quarter of fiscal 2025 for the period ended March 31 and reported a 7% increase in organic sales. It immediately reduced its full-year revenue guide from the previous $3.50 to $3.60, a significant advantage in the current environment.

Additionally, a 5% order increase helped Johnson controls raise its backlog to $14 billion. The following figure shows the continued growth of installed equipment and services due to the increasing deployment of digital technologies in its solutions.

Johnson controls the construction solutions.
Data source: Johnson Controls Presentation. Author chart.

The company has a variety of long-term growth catalysts, including the inherent value of increasingly adopting its open web connectivity solutions. The kit uses digital technologies (AI and Digital Twins) to optimize building efficiency. Not only does this save money, it can also help building owners achieve their zero emissions targets.

Additionally, Johnson controls heating, ventilation and air conditioning systems, with a growing opportunity from their use to control the temperature of the data center, making the company a backdoor way to play with AI/data center spending boom.

3M's relatively new CEO Bill Brown (appointed in May 2024) is already pushing for improvements in a company that has been underperforming for some time. Previous management handles the burden of ongoing legal issues in the company. Additionally, a poorly performed healthcare business (now spins as Payment) Despite substantial merger and acquisition activities, no significant improvement has been seen, which also distracts it from its focus on its core industry and consumer business.

With Solventum now developing and the restructuring of previous management starts to take fruit, it is time for the new CEO to take the next step and revitalize the company.

The early signs are good. Brown is driving growth in new product introductions (NPIs) while blocking and addressing operational improvements, such as improving their full delivery, asset utilization and operational efficiency. Even if the final market for 3M weakens in 2025, these improvements are the same, and management believes it is tracking its low-end guide for guidance on 2% to 3% growth in organic sales throughout the year.

While this is disappointing, readers should note that operational improvements helped the operating margin grow to 23.5% in the first quarter, compared with 21.3% in the same period last year.

Therefore, if the tariff environment improves, 3M may see a triple positive impact: the ultimate market improvement, the cost of tariffs is smaller, and the benefits may increase as profit margins affect the bottom line. It's a compelling mix that makes the stock attractive on a risk/reward basis.

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Lee Samaha has no position in any of the stocks mentioned. Motley Fool has positions and recommends 3M and Johnson Controls International. Motley Fool recommends Solventum. Motley Fool has a disclosure policy.

3 "Top Draft Choices" on Wall Street are now originally published by Motley Fool