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Honeywell International Inc. (HON - Analyst Report) reported solid second quarter results on July 18, which marked its 12th straight quarter with a positive earnings surprise. Strong earnings momentum helped this diversified technology and manufacturing company achieve a Zacks #2 Rank (Buy) on September 8.

In addition, the company has been consistently paying a quarterly dividend that affirms a yield of 2.5%.

Second Quarter Results

Honeywell reported second-quarter 2012 earnings per share from continuing operations of $1.14, which was 2.7% above the Zacks Consensus Estimate of $1.11. The company had a robust quarter with earnings increasing 14% year over year. Margins expanded by 70 basis points.

Total revenue was $9.4 billion, an increase of 4% from the year-ago quarter. Sales growth in the U.S. and the emerging economies were driving factors, offsetting the weak performance of short cycle businesses in Europe. Longer cycle businesses did well, including commercial aerospace and UOP. Revenues missed the Zacks Consensus Estimate of $9.5 billion.

The company reported revenue growth in three of its four segments.

Income from continuing operations was $1.2 billion in the quarter versus $1.1 million in the second quarter of 2011, due to lower SG&A and declines in interest and financial charges.

Outlook Raised

Management raised its earnings guidance for 2012, and now expects earnings per share from continuing operations between $4.40 and $4.55, compared with its previous guidance range of $4.35 to $4.55.

Total revenue is now expected between $37.8 billion and $38.4 billion, compared with the earlier projection of $38.0 billion to $38.6 billion.

The company expects to continue its strong performance in 2012 and beyond, aided by strong positions in growing industries and continuous efforts to undertake new ventures. For further expansion, the company is focused on growth factors, such as investments in new products, innovative technology, expansion in emerging markets and initiatives in key processes.

The Zacks Consensus Estimate for 2012 increased a penny over the last 60 days to $4.50, implying year-over-year growth of 18.7%. The Zacks Consensus Estimate for 2013 is at $5.00, implying an 11.1% increase over 2012.

As is evident from Honeywell’s’ chart below, consensus estimates have trended upward over the past two quarters, due to significantly higher positive earnings surprises.

Dividend

Honeywell International has been paying consistent quarterly dividends since 1970. The company has enough cash on its balance sheet to cover the dividend payout for several years. The current quarterly dividend of 0.373 cents per share affirms a yield of 2.5%.

Valuation Looks Compelling

Based on a 5-year EPS growth rate of 13.1%, Honeywell International’s PEG ratio comes to 1.0, which is on par with the benchmark for a fairly priced stock.

Furthermore, Honeywell International currently trades at 13.8x its forward earnings, a 5.5% discount to 14.6x for the industry and a 2.1% discount to 14.1x for the S&P 500.

The return on equity (ROE) for Honeywell is 29.2%, much higher than the peer group average of 11.0%.

Headquartered in Morris Township, New Jersey, Honeywell International is a diversified technology and manufacturing company, serving customers worldwide with aerospace products and services, control, sensing and security technologies for buildings, homes and industry, turbochargers, automotive products, specialty chemicals, electronic and advanced materials, process technology for refining and petrochemicals and energy efficient products and solutions for homes, business and transportation. The company has a market cap of $46.5 billion.

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