What happened

Shares in industrial conglomerate Honeywell International (NYSE:HON) fell 17.5% in March, according to data provided by S&P Global Market Intelligence. It was hardly surprising given the havoc wrought on the aerospace industry by the travel bans imposed in order to contain the COVID-19 pandemic. After all, Honeywell's aerospace segment is its biggest profit generator

However, the stock price decline isn't all about commercial aviation. CEO Darius Adamczyk has previously outlined that 60% of the company's revenue comes from short-cycle businesses, or businesses that have a shorter time between initial contact and sales closure -- meaning they will quickly turn down in the event of a slowdown. This means that, however conservative Honeywell's full-year 2020 guidance looked in February, it's highly unlikely to be met now.

A plane in flight.

The swing factor in Honeywell's earnings is likely to come from aerospace. Image source: Getty Images.

Indeed, from its building technology solutions, through its industrial safety and productivity products and to its performance materials, almost all of Honeywell's portfolio of businesses face some sort of cyclical risk.

So what

There's plenty of near-term risk to Honeywell's earnings, and no end to the uncertainty as to when airplane traffic will get back to normalcy. However, it's worth noting two things about Honeywell.

First, unlike its peers and one-time merger partners General Electric and United Technologies (newly merged with Raytheon in a company called Raytheon Technologies), Honeywell's earnings are relatively diversified -- something that should mean lower risk for the company.

Purely as an example, let's say that the global economy does recover from the COVID-19 pandemic, but air travel remains restricted. In this scenario, Honeywell's earnings will be affected much less than at, say, GE or Raytheon Technologies.

Second, Honeywell is a conservatively run company capable of withstanding a downturn. For example, its debt to shareholder's equity ratio -- a key measure of financial health -- is a lot lower than that of many of its peers.

GE Debt to Equity Ratio Chart

Data by YCharts

Now what

Honeywell certainly has near-term risk, and it's impossible to know how the aviation industry will fare in the medium term. On the other hand, its diversification and solid balance sheet will help to reduce the potential downside from here. As such, the stock is an interesting option for investors looking to invest in stocks with upside potential given a recovery in the economy.