Digitalization And Energy Efficiency Will Empower Connected Homes

Key Takeaways

• Accelerating smart home adoption, successful product launches, and strategic acquisitions are driving higher-margin growth and expanded recurring revenues.
  
• Operational efficiencies and product focus on energy solutions position the company to benefit from housing market recovery and sustainability trends.
  
• Weak R&D investment and overreliance on legacy products risk undermining growth, competitive positioning, and margins amid intensifying industry innovation and supply chain vulnerabilities.

Catalysts

Develops, manufactures, sells, and distributes comfort, energy management, and safety and security solutions in the United States, Europe, and internationally.

• Accelerating adoption of smart and connected home products—including the recent launches such as Honeywell Home FocusPRO thermostats and First Alert Smart Smoke and CO Alarms compatible with Google Nest—positions Resideo to benefit from rapid digitalization of households, driving sustained organic revenue growth and expansion in recurring, higher-margin platform and subscription services.
  
• Growing demand for energy efficiency and sustainability, with governments and consumers increasingly incentivized to adopt advanced HVAC controls and energy management solutions, is driving higher sales of Resideo’s energy-efficient product lines and increasing content per home, which supports long-term revenue growth and improved net margins as product mix shifts to more profitable offerings.
  
• Structural improvements in manufacturing and supply chain—such as the high percentage of USMCA-compliant goods produced in Mexico—are insulating Resideo from tariff risk and driving operational efficiency, providing ongoing gross margin expansion and boosting overall profitability even amidst dynamic global trade environments.
  
• Successful integration of the Snap One acquisition, combined with Resideo’s rapid cadence of new product introductions (approximately 100 in the last quarter alone), is allowing the company to gain market share, drive cross-sell opportunities, and expand into higher-margin Exclusive Brand categories, which is supporting gains in both revenue and EBITDA.
  
• Anticipated recovery in the housing cycle, coupled with a multi-year backlog of aging housing stock needing retrofit and upgrades, is expected to unlock stronger replacement and distribution demand across security, comfort, and energy management categories—amplifying the positive impact on top-line growth, gross margin, and long-term earnings as the broader macro environment improves.

Resideo Technologies Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Resideo Technologies compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Resideo Technologies's revenue will grow by 4.2% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 0.6% today to 4.6% in 3 years time.
• The bullish analysts expect earnings to reach $363.2 million (and earnings per share of $3.1) by about July 2028, up from $45.0 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 13.8x on those 2028 earnings, down from 79.4x today. This future PE is lower than the current PE for the US Building industry at 21.1x.
• Analysts expect the number of shares outstanding to grow by 1.43% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.21%, as per the Simply Wall St company report.

Resideo Technologies Future Earnings Per Share Growth

Risks

• The accelerating consolidation of smart home platforms by large tech companies like Amazon, Google, and Apple poses a risk that Resideo’s devices may lose market share and pricing leverage, especially as these giants integrate their own ecosystems and hardware, which could weigh on long-term revenue growth.
  
• Resideo’s heavy reliance on legacy security and HVAC product lines, rather than aggressively shifting toward high-growth connected and interoperable solutions, increases the risk that future market shifts will leave it competing in slower-growth, lower-margin categories, compressing net margins over time.
  
• Structural underinvestment in research and development compared to major smart home players raises the probability that Resideo’s innovation cadence will lag, with the risk that its product portfolio will be less attractive than newer, more advanced offerings from competitors, threatening both customer retention and revenue.
  
• The commoditization of smart home hardware and the rapid evolution of interoperability standards put further pressure on Resideo’s ability to maintain price premiums and a differentiated moat, resulting in ongoing margin erosion as price competition intensifies across the industry.
  
• Persistent global supply chain instability, geopolitical risks, and exposure to tariffs—especially in the ADI distribution segment—could drive greater input cost volatility and production delays, directly impacting both earnings consistency and company-wide gross margins.

Valuation

• The assumed bullish price target for Resideo Technologies is $25.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Resideo Technologies's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $25.0, and the most bearish reporting a price target of just $21.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $8.0 billion, earnings will come to $363.2 million, and it would be trading on a PE ratio of 13.8x, assuming you use a discount rate of 9.2%.
• Given the current share price of $24.07, the bullish analyst price target of $25.0 is 3.7% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.