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Can Honeywell Boost '17 Performance with Unique Products?

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Industrial goods manufacturer Honeywell International Inc. (HON - Free Report) recently launched Centurion, a composite fabric indigenously designed to develop lightweight apparel and equipment to particularly cater to the demanding job requirements of law enforcement officers. The fabric is made from Honeywell Spectra fiber, which is reportedly known as one of the world’s strongest and lightest manmade fibers. It is perfectly suited for any sort of application where the product needs to be strong yet lightweight.

Centurion will reduce weight of vests typically used by security personnel by 35–40% as it does not require any extra fabric. The fabric is laser-cut according to user preference and will have slits to hang, hook or tie gear as required. Centurion further eliminates the need of these gears to be sewn into vests, making them lighter and more comfortable for officers to wear, as well as faster and easier for manufacturers to produce. In addition to being lightweight, Centurion-made vests are known for their durability as they are resistant to cuts, abrasion and water.

The innovative features of Centurion are largely attributable to Spectra fiber that is made from ultra-high molecular-weight polyethylene using a patented gel-spinning process. When compared on a pound for pound basis, Spectra is reportedly about 15 times stronger than steel, yet light enough to float. Furthermore, its strength is 60% more than alternate aramid fiber.

With such technologically-advanced products, Honeywell aims to improve its revenues in the future. The company has underperformed the Zacks categorized Diversified Operations industry with an average three-month return of 7.9% compared with 9.3% for the latter.



Notably, Honeywell has offered a lackluster guidance for 2017 owing to continued macroeconomic woes. The company expects a tepid demand pattern for its business jets and mobile scanners in 2017 due to sluggish global growth, volatility in crude oil prices and a tempered Chinese economy. Consequently, the company projects 2017 earnings in the range of $6.85–$7.10 per share, while revenues are anticipated to be down 1% to up 2% year over year. For fourth-quarter 2016, the company anticipates earnings of $1.74 per share, which is at the lower end of its previously guided range of $1.74–$1.78.

In order to counter the muted growth environment and improve its profitability, Honeywell further intends to initiate stringent cost-cutting efforts, while improving its product portfolio with opportune acquisitions and strategic divestures. Whether such efforts will bear fruits in 2017 remains to be seen.

Honeywell currently has a Zacks Rank #4 (Sell). Some better-ranked stocks in the same industry include Hitachi, Ltd. (HTHIY - Free Report) , Lydall, Inc. and AO Smith Corp. (AOS - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Hitachi has a long-term earnings growth expectation of 13% and has beaten estimates thrice in the trailing four quarters for an average positive earnings surprise of 103.5%.

Lydall is currently trading at a forward P/E of 20.2x.

AO Smith has a long-term earnings growth expectation of 10.7% and has beaten estimates in all the trailing four quarters for an average earnings surprise of 5.9%.

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