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Honeywell International Displays Bright Prospects Amid Risks

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On Sep 10, we issued an updated research report on Honeywell International Inc. (HON - Free Report) .

In the past three months, this Zacks Rank #3 (Hold) stock has yielded a return of 7.2% compared with the industry’s rise of 0.4%.

Existing Scenario

Strength in commercial aviation and solid demand in its commercial fire and connected building technologies are likely to drive Honeywell’s revenues in the quarters ahead. Going forward, increased technology spending of the global commercial aviation industry and higher demand for state-of-the-art technology solutions like FalconConnect will likely continue bolstering the company’s revenues in the quarters ahead. As a matter of fact, it currently anticipates generating organic sales growth of 5-6% in 2018.

Moving ahead, Honeywell expects greater operational excellence, stock buybacks and corporate tax benefits to continue driving its profitability. The company also raised its full-year earnings view to the $8.10-$8.20 per share range, from the previous projection of $8.05-$8.15 per share.

Moreover, the company recently acquired Ortloff Engineers, Ltd. The buyout is expected to strengthen its gas processing technological capabilities. This apart, Honeywell has been steadily improving liquidity on the back of its unique HOS Gold working capital tool and increased operational efficacy.

However, the company is currently facing inflationary headwinds across its entire supply-chain process. It experienced inflation in a number of areas, especially logistics, transportation and in certain material prices like metals during the second quarter of 2018. Escalating costs might dent the company’s profitability in the quarters ahead.

Further, high research and development costs could also be a drag on Honeywell’s Aerospace segment’s profitability.

Stocks to Consider

Some better-ranked stocks in the same space are Federal Signal Corporation (FSS - Free Report) , Crane Company (CR - Free Report) and Carlisle Companies Incorporated (CSL - Free Report) . While Federal Signal sports a Zacks Rank #1 (Strong Buy), Crane Company and Carlisle Companies carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Federal Signal surpassed estimates in each of the trailing four quarters with an average positive earnings surprise of 22.48%.

Crane Company outpaced estimates in each of the preceding four quarters with an average earnings surprise of 3.03%.

Carlisle Companies exceeded estimates in each of the trailing four quarters with an average earnings surprise of 12.85%.

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