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Honeywell's Technology Chosen by Phu My Plastics Production

Zacks Equity Research

Honeywell International Inc. HON recently announced that its business unit, Honeywell UOP, has been selected by Phu My Plastics Production JSC to provide its state-of-the-art UOP technology in Vietnam. Notably, Phu My Plastics Production will be using Honeywell UOP's C3 Oleflex technology for the production of polymer-grade propylene at its facility. This will enable the plant to cater to the increasing requirement of plastics in Vietnam as well as other countries in Southeast Asia.

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 technology licenses for the Oleflex process. In sync with the deal, the company will also provide proprietary and non-proprietary equipment, process design package, proprietary catalysts, adsorbents as well as on-site operator training, among others.

Notably, 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 allow Phu My Plastics Production to boost operational flexibility, apart from ensuring steady-state of operations and improved on-stream reliability.

Our Take

Honeywell believes that strength in licensing and engineering sales is likely to keep driving revenues of its Performance Materials and Technology business. Also, solid demand for its commercial fire and productivity products will boost the company’s Safety and Productivity Solutions’ revenues in the quarters ahead. It currently anticipates generating organic sales growth in the range of 2-5% in 2019.

Over the past year, this Zacks Rank #3 (Hold) company's shares have gained 2.1% against 6.7% decline recorded by the industry.

 

Moreover, the company 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. In addition, Honeywell completed the acquisition of the German company Transnorm (November 2018). As a matter of fact, these initiatives are likely to help it concentrate on high-growth industrial businesses and thus boost sales growth.

However, Honeywell is currently dealing with rising costs of sales. Notably, in 2018, the company's cost of sales increased 5.3% year over year. Gross margin for the year was down 140 basis points. Also, high research and development costs could also be a drag on the Aerospace segment's profitability.

Key Picks

Some better-ranked stocks in the same space are Carlisle Companies Inc. CSL, Macquarie Infrastructure Co. MIC and Federal Signal Corp. FSS. While Carlisle sports a Zacks Rank #1 (Strong Buy), Macquarie Infrastructure and Federal Signal 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.

Federal Signal delivered average positive earnings surprise of 21.57% in the trailing four quarters.

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