Have you ever watched a stock you really like drift lower for months and wondered if the market has simply lost its mind? That’s exactly how a lot of us have felt watching two industrial heavyweights get punished this year even though their fundamentals still look rock-solid. Then, out of nowhere, a major Wall Street firm steps up and basically says: “Relax, the selling is overdone—load the truck.” That’s what happened this week, and it caught my attention immediately.
Why Deutsche Bank Just Turned Strongly Bullish
Analysts at one of Europe’s biggest banks put out fresh research that reads like a love letter to the industrial sector, specifically targeting two names that have lagged the broader market in 2025. They slapped Buy ratings on both Eaton and Honeywell, but went one step further with Eaton—naming it a top pick for 2026. In a market obsessed with AI chips and weight-loss drugs, seeing someone pound the table on old-school industrials felt refreshingly contrarian.
Let me be upfront: I’ve followed both companies for years. These aren’t flashy momentum plays. They’re the kind of businesses that power the real economy—literally, in Eaton’s case—and yet they’ve been left in the dust while the S&P 500 keeps printing new highs. So when a respected desk says the risk/reward is now heavily skewed to the upside, I sit up and listen.
Eaton: From Laggard to Potential 2026 Leader
Eaton has been the poster child for “great company, annoying stock” in 2025. Electrical infrastructure, data center boom, grid modernization—everything is going its way on paper. But the shares? They’ve gone practically nowhere for months. The main culprit, according to the note, has been a string of quarters that were good… but not good enough to spark the kind of explosive guidance raises investors have grown addicted to in this market.
Add in the constant chatter about tariffs—especially on components coming from Asia—and you had a perfect recipe for multiple compression. The stock simply refused to participate in the rally. Deutsche Bank acknowledges all of that, but here’s their key insight: most of those headwinds are peaking right now and should begin fading meaningfully in 2026.
“We see tariff concerns as largely transitory and expect a re-rating as clarity emerges and growth reaccelerates.”
– Deutsche Bank equity research team
They actually trimmed their near-term price target from $440 down to $418—honest move, I respect that—but simultaneously made Eaton one of their highest-conviction ideas for next year. In plain English: they think the stock is cheap here, and the setup for 2026 could be spectacular once the tariff fog lifts and data-center spending keeps roaring.
Personally, I love when analysts show this kind of nuance. Instead of just cheerleading, they’re saying, “Yes, things have been messy, but the mess is already in the price.” That’s the sort of thinking that has made me money over the years more than any “to-the-moon” target ever did.
Honeywell and the “Spin Purgatory” Discount
If Eaton’s story is about temporary macro noise, Honeywell’s underperformance feels more like self-inflicted complexity. The conglomerate has been in the middle of a massive breakup for what feels like forever. Investors hate uncertainty, and spinning off businesses tends to create a cloud of “who’s going to own what and when?” That cloud has weighed on the stock all year.
One piece—Solstice Advanced Materials—already hit the market a few weeks ago. The remaining big split (aerospace and automation) is slated for 2026. Until that happens, many portfolio managers simply park Honeywell in the “too hard” pile and move on.
Deutsche Bank’s take? The market is dramatically over-discounting the breakup risk and under-appreciating the value unlock coming. Their math suggests the sum-of-the-parts could be worth roughly 25% more than where the stock trades today once everything is cleanly separated.
- Aerospace: pure-play leader with massive defense exposure and aftermarket tailwinds
- Automation: high-margin building solutions and process automation software
- Remaining performance materials: still cash-flow machines
Put those three together post-spin, and suddenly you’re not looking at a sleepy conglomerate anymore—you’re looking at three focused leaders, each likely to command premium multiples. The analysts basically argue that buying Honeywell today is like getting paid to wait for the breakup party.
What About the Broader Industrial Backdrop?
Let’s zoom out for a second. Industrial stocks as a group have had a weird year. On one hand, everyone talks about reshoring, grid upgrades, and factory construction. On the other hand, higher interest rates and tariff threats have made investors nervous about capex cycles.
The Fed is widely expected to cut rates again this month, and if that happens on schedule, it removes one of the biggest anchors holding back industrial sentiment. Combine lower rates with a potential easing of trade tensions post-election, and suddenly the macro setup starts looking a lot friendlier for companies exposed to infrastructure and manufacturing.
I’m not saying everything flips overnight—markets rarely work that cleanly—but the risk/reward for quality industrials feels materially better today than it did six months ago. And when a shop like Deutsche Bank steps up with fresh Buy calls, it’s usually worth paying attention.
The Solstice Spinoff Side Note
Quick aside for anyone who owns Honeywell or received shares in the recent spin: Solstice Advanced Materials is getting booted from the S&P 500 later this month and dropped into the SmallCap 600. Some investors see index exclusion as a death knell, but that’s usually nonsense.
At roughly $7.5 billion market cap, it simply doesn’t meet the size criteria anymore. The business itself is fine—specialty chemicals with strong pricing power. If anything, moving to the small-cap index could attract a new crowd of investors who focus specifically on that universe.
Putting It All Together
Here’s my personal takeaway after digesting the research and looking at the charts: both Eaton and Honeywell are classic examples of high-quality companies trading at depressed valuations because of temporary, solvable problems.
Eaton offers exposure to the unstoppable electrification and data-center themes, with tariff headwinds likely peaking.
Honeywell gives you a front-row seat to one of the more interesting corporate breakups in years, with meaningful value likely to be unlocked in 2026.
Neither stock is going to double overnight. But if you’re the type of investor who can handle some near-term chop while waiting for catalysts to play out, these two names just moved way up my watchlist.
Sometimes the best opportunities hide in the sectors everyone else has forgotten about. Right now, industrials feel exactly like that forgotten corner of the market. And when a major bank comes out swinging with Buy ratings and 2026 top-pick designations, maybe—just maybe—it’s time to start paying attention again.
Full disclosure: I don’t own shares of either company as I write this, but after reading the latest research, both are firmly on my radar for potential addition when the setup feels right. In this market, patience still gets rewarded… and right now, patience on quality industrials looks pretty attractive.
