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Honeywell's Technology Chosen by Jiangsu Sailboat in China

Zacks Equity Research

Honeywell International Inc.'s HON business unit, Honeywell UOP, has recently been selected by Jiangsu Sailboat Petrochemical Co., Ltd. to provide its state-of-the-art UOP technology in China. Notably, Jiangsu Sailboat will be using Honeywell UOP's C3 Oleflex technology for the production of 700,000 metric tons of polymer-grade propylene per year at its plant based in Lianyungang City, Jiangsu Province.

Jiangsu Sailboat’s existing facility currently leverages Honeywell UOP's methanol-to-olefins process for the production of ethylene and propylene. Notably, the expansion of this facility will support Jiangsu Sailboat’s intention to produce more propylene, which will cater to the growing requirement of plastics in China.

Honeywell UOP is a division of Honeywell's Performance Materials and Technologies strategic business group, which also comprises Honeywell Process Solutions. Per the deal, Honeywell UOP will be responsible for providing equipment, licensing and a process design package, catalysts, adsorbents as well as on-site operator training, among others.

The company’s C3 Oleflex technology helps in converting propane to propylene with the help of catalytic dehydrogenation. With recyclable and low emissions features, its platinum-alumina-based catalyst system ensures minimization of harmful effect on the environment. As a matter of fact, C3 Oleflex technology’s independent reaction and regeneration sections will enable Jiangsu Sailboat to boost operational flexibility, apart from ensuring steady-state of operations and improved on-stream reliability.

Existing Business Scenario

Going forward, strength in licensing and engineering sales is likely to drive revenues of Honeywell’s Performance Materials and Technology business. Also, impressive demand for its commercial fire and productivity products will supplement its Safety and Productivity Solutions’ revenues in the upcoming quarters. Notably, the company currently anticipates generating organic sales growth in the range of 2-5% in 2019.

In addition, Honeywell is progressing well with its portfolio transformation strategy, having declared spin-off dividends of shares of Resideo, and completing the divestment of Garrett Motion Inc. Over the past year, this Zacks Rank #3 (Hold) company's shares have gained 2.3% against 6.4% decline recorded by the industry.

However, the company is dealing with rising costs of sales. Notably, in 2018, its cost of sales increased 5.3% year over year. In addition, high research and development costs could also be a drag on the Aerospace segment's profitability.

Stocks to Consider

Some better-ranked stocks in the same industry are Carlisle Companies Incorporated CSL, Macquarie Infrastructure Company MIC and United Technologies Corporation UTX. While Carlisle sports a Zacks Rank #1 (Strong Buy), Macquarie Infrastructure and United Technologies carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Carlisle pulled off average positive earnings surprise of 15.00% in the trailing four quarters.

Macquarie Infrastructure delivered average earnings surprise of 0.51% in the trailing four quarters.

United Technologies delivered average positive earnings surprise of 14.87% in the trailing four quarters.

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