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Honeywell (HON) Hits 52-Week High on Core Business Focus

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Shares of industrial goods manufacturer, Honeywell International Inc. (HON - Free Report) hit a 52-week high of $135.90 during yesterday’s trading session, before closing a tad lower at $135.84 for a healthy one-year return of 18.9%. Barring minor hiccups, the company’s share price has steadily been on an uptrend since the second half of April. This Zacks Rank #3 (Hold) stock has the potential for further price appreciation with long-term earnings growth expectations of 9.3%.

Growth Drivers    

Honeywell’s diversified business portfolio has the potential to earn consistent above-average returns and mitigate operating risks. The company’s diligent focus on working capital management, free cash flow generation and a conservative balance sheet are its key strengths in an enterprising macroeconomic environment.

The company’s balanced mix of long- and short-cycle businesses, along with a decent organic growth and expansion in high-growth regions augur well on a long-term perspective. With a flexible yet disciplined focus on cost and productivity, Honeywell remains focused on increasing its presence in high-growth regions. The company has regularly fine-tuned its portfolio, having sold about 60 of its units (accounting for $7 billion in sales) since 2002 and acquiring 90 companies contributing $14 billion in revenues over the same period.

Honeywell recently inked a definitive agreement to acquire Nextnine, a privately held security management solutions provider for industrial cyber security, for an undisclosed amount. The transaction is likely to augment Honeywell’s cyber security portfolio with complementary products and services.

Nextnine’s comprehensive portfolio will be utilized in Honeywell Connected Plant that facilitates connected plant operations to improve plant availability, safety and reliability quotients. It takes advantage of streaming data from sensors and devices to quickly assess current conditions, recognize warning signs, deliver alerts and automatically trigger actions, based on analytics solutions. The acquisition, therefore, is likely to transform client operations to make it more reliable, profitable and secure.

Honeywell reportedly has the largest industrial cyber security research capabilities in the industry. The company has hi-tech solutions to fortify clients against cyber threats. Two such solutions include Risk Manager – the industry's first solution to proactively monitor, measure and manage industrial cyber security risks – and Secure Media Exchange, which protects plants against threats from removable media such as USB flash drives.

With such state-of-the-art products, Honeywell strives to gain a competitive edge over its rivals and augment its revenues. The company has outperformed the Diversified Operations industry with an average year-to-date return of 17.2% compared with a 4.4% gain for the latter.



All these factors probably raised investor confidence and drove the company’s shares to a fresh 52-week high.

Stocks to Consider

Some better-ranked stocks in the industry include Barloworld Limited (BRRAY - Free Report) , Bunzl plc (BZLFY - Free Report) and Federal Signal Corporation (FSS - 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.

Barloworld has a long-term earnings growth expectation of 17.2%. It surpassed estimates thrice in the trailing four quarters with an average positive earnings surprise of 1.3%.

Bunzl has a long-term earnings growth expectation of 3.2%.

Federal Signal surpassed estimates twice in the trailing four quarters with an average positive earnings surprise of 3.1%.

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