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Honeywell (HON) to Buy US Digital Designs, To Aid Public Safety

Honeywell International Inc. HON yesterday announced that it agreed to acquire Tempe, AZ-based US Digital Designs, Inc. The financial terms of the all-cash transaction have not been disclosed.

Notably, Honeywell’s share price decreased 0.3% yesterday, ending the trading session at $209.23.

US Digital Designs provides products and services that help reduce the response time for first responders in case of emergencies. Its communications (alerting and dispatch) solutions include illuminated speakers, mobile monitoring tools and messaging signs. The privately held company was founded in 2000.

Inside the Headlines

For Honeywell, the acquisition of US Digital Designs represents 14X earnings before interest, tax, depreciation and amortization (“EBITDA”). In return, the to-be-acquired assets are expected to boost Honeywell’s EBITDA margin and yield >25% return on investment by the fifth year of the transaction completion.

US Digital Designs, upon the transaction completion, will be integrated with Honeywell’s Fire and Connected Life Safety systems business. The business comes under the ambit of Honeywell’s Building Technologies segment. Notably, the segment provides environmental & energy solutions, security and fire, and building solutions. The segment’s revenues in third-quarter 2021 were $1,370 million, representing 16.2% of total revenues generated by Honeywell.

The products/solutions provided by US Digital Designs will enhance Honeywell’s product offerings for improving public safety communications. To be precise, communications of details like location, seriousness and kind of hazard will be swift and, thus, help speed up the response time for emergencies. Also, solutions offered by US Digital Designs will help customers comply with environmental, social and governance targets.

Subject to the receipt of regulatory approvals and the fulfillment of certain closing conditions, Honeywell anticipates completing the acquisition in first-quarter 2022. Notably, the company is not making any changes related to the acquisition in its financial guidance.

For 2021, Honeywell anticipates earnings per share of $8.00-$8.10 and revenues of $34.2-$34.6 billion. Its organic revenues are expected to increase 4-5%. Operating cash flow is predicted to be $5.9-$6.2 billion and free cash flow is likely to be $5.3-$5.6 billion.

Honeywell’s Buyout Activities

The company believes in acquiring businesses to improve its product lines and market exposure. In the first three quarters of 2021, the company invested $1,334 million for acquiring businesses (net of cash acquired).

In September 2021, Honeywell acquired Performix. The buyout has been strengthening the company’s advanced portfolio of automation solutions that include the likes of enterprise quality management software and Experion Process Knowledge System. Honeywell added Sparta Systems to its portfolio in the first half of 2021.

Zacks Rank, Estimate Trend and Price Performance

With a market capitalization of $144.4 billion, Honeywell currently carries a Zacks Rank #3 (Hold). The company’s strengthening businesses, especially the commercial aviation aftermarket business, and synergistic gains from buyouts, commercial and operational excellence initiatives, and healthy cash flow position are beneficial. However, woes related to the defense and space businesses, supply-chain headwinds, and higher costs are concerning.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In the past three months, the company’s shares have lost 5.6% compared with the industry’s decline of 9.4%.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

Meanwhile, the Zacks Consensus Estimate for its earnings has been decreased by 2.3% to $2.09 for the fourth quarter of 2021 and has declined 0.1% to $8.06 for 2021 in the past 60 days. Likewise, the consensus estimate for 2022 has been decreased by 1.7% to $9.03 during the same timeframe.

Honeywell International Inc. Price and Consensus

Honeywell International Inc. Price and Consensus
Honeywell International Inc. Price and Consensus

Honeywell International Inc. price-consensus-chart | Honeywell International Inc. Quote

Three Players in the Sector With Active Buyouts

Three stocks in the industry, which are actively engaged in buyouts, are discussed below.

Danaher Corporation DHR acquired Canada-based Vanrx Pharmasystems in February 2021, while Swift Biosciences was added to the portfolio in first-quarter 2021. In August 2021, Danaher acquired Aldevron. DHR presently carries a Zacks Rank #3.

Danaher’s shares have decreased 2.1% in the past three months. The Zacks Consensus Estimate for DHR’s earnings has increased 3% for 2021 and 3.1% for 2022 in the past 60 days.

Carlisle Companies Incorporated CSL acquired California-based Henry Company in September 2021. CSL presently carries a Zacks Rank #3.

Shares of Carlisle have gained 22% in the past three months. The Zacks Consensus Estimate for CSL’s earnings has risen 1.5% for 2021 and has been unchanged for 2022 in the past 60 days.

Federal Signal Corporation FSS agreed to acquire Deist Industries Inc. in November 2021. It added Ground Force Worldwide to its portfolio in October and bought OSW Equipment and Repair, LLC in February.

Shares of Federal Signal have gained 11.8% in the past three months. The Zacks Consensus Estimate for FSS’ earnings has decreased 5.4% for 2021 and 1.8% for 2022 in the past 60 days.

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Honeywell International Inc. (HON) : Free Stock Analysis Report

Danaher Corporation (DHR) : Free Stock Analysis Report

Carlisle Companies Incorporated (CSL) : Free Stock Analysis Report

Federal Signal Corporation (FSS) : Free Stock Analysis Report

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