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Honeywell (HON) Discusses View at Investor Day Conference

Zacks Equity Research

Honeywell International Inc. HON CEO Darius Adamczyk highlighted the company’s future priorities and financial targets at the recently held annual investor conference at its Morris Plains, NJ facility. Following the news, shares were up about 0.8%, reflecting bullish investor sentiments surrounding the latest announcements.

The company communicated that transformation, growth and productivity efforts and investment efforts are key components of its near- and long-term value creation model. These priorities are strengthening its capabilities to deliver high values to customers and shareholders.

Honeywell also highlighted its capital-allocation strategies. For 2019, the company anticipates spending significant portion of its capital on growth investments, with R&D expenses and capital expenditures amounting to 9% of sales. In addition, shares worth $4 billion will likely be repurchased during 2019.

For 2019, organic sales growth is anticipated to be 3-6%. Earnings will likely be $7.90-$8.15 per share, reflecting year-over-year growth of 0.2% on an adjusted basis. Adjusted free cash flow will be roughly $5.5-$6 billion.

For the second quarter, the company expects to report adjusted earnings in the band of $2.05-$2.10 per share, assuming organic sales growth of about 4-7%.

Our Take

Strength in automation and process solutions businesses is likely to boost revenues of the company's Performance Materials and Technology segment. Honeywell believes that solid demand for its warehouse automation, sensing and IoT businesses will aid its Safety and Productivity Solutions’ revenues. Further, strength in the company’s commercial aftermarket and sensing businesses is likely to boost Aerospace revenues. Also, strong demand for commercial fire and security products particularly in India and China is likely to drive the Building Technologies segment.

Honeywell has progressed with its portfolio transformation strategy, having declared spin-off dividends of shares of Resideo, and completing the divestment of Garrett Motion Inc. Also, in 2018, the company reorganized its operating segments by divesting Transportation Systems business and the Homes and ADI Global Distribution business. In addition, the company acquired the German company — Transnorm — in November 2018. These tactical initiatives will help it concentrate on high-growth industrial businesses, and thus boost sales growth.

Zacks Rank & Other Stocks to Consider

Honeywell currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks from the same space are Macquarie Infrastructure Company MIC, Carlisle Companies Incorporated CSL and Federal Signal Corporation FSS. While Macquarie and Carlisle sport a Zacks Rank #1 (Strong Buy), Federal Signal carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Macquarie’s earnings surprise in the last reported quarter was 12.00%.

Carlisle outpaced estimates thrice in the preceding four quarters, the average earnings surprise being 19.07%.

Federal Signal surpassed estimates in each of the preceding four quarters, the average positive earnings surprise being 21.75%.

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