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Honeywell (HON) to Buy Sparta, Expand Life Science Offerings

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Honeywell International Inc. (HON - Free Report) recently announced that it has decided to buy Sparta Systems from New Mountain Capital. The buyout, which is expected to be completed by the first quarter of 2021 subject to certain regulatory approvals, is valued at $1.3 billion in cash.

Honeywell’s shares declined 1.3% yesterday to eventually close the trading session at $207.94.

Hamilton, N.J.-based Sparta Systems is engaged in providing enterprise quality management software for the life sciences industry. The company provides its services to more than 400 customers, which include major pharma and medical device companies in the world. Notably, the company’s two major platforms are TrackWise Digital and QualityWise.ai.

Benefits of the Buyout

The acquisition will enable Honeywell to strengthen its position in digital transformation, industrial automation and enterprise performance management solutions space. Notably, Honeywell will leverage Sparta’s expertise in artificial intelligence enabled software as a service (SaaS)-based solutions and combine it with Honeywell Forge and Experion Process Knowledge System to further expand into the life sciences market.

The integration of Sparta's TrackWise Digital and QualityWise.ai with Honeywell Forge will allow Honeywell to facilitate life sciences manufacturers in receiving important insights from their manufacturing and quality data. This, in turn, will help them in boosting manufacturing processes while maintaining the standard of product and ensuring safety of patients.

Other Inorganic Moves

In December 2020, Honeywell completed the acquisition of Sine Group, a SaaS company engaged in offering visitor management, supply chain and workplace solutions. (Read more: Honeywell Buys Sine Group, Strengthens Product Offerings). Also, in October 2020, the company acquired Ballard Unmanned Systems, which will strengthen its prospects in the unmanned aerial systems market. In addition, it acquired Rocky Research in the same month, which will enhance growth opportunities for its existing offerings in the energy storage, power and thermal management, and power generation arenas.

Zacks Rank and Price Performance

Honeywell, with approximately $145.9 billion market capitalization, currently carries a Zacks Rank #3 (Hold). The company stands to gain from strength across its defense and space businesses, strong demand for warehouse automation products and high backlog level. However, headwinds across its commercial original equipment business are likely to affect its near-term performance.

In the past three months, the company’s share price has increased 31.6% compared with the industry’s growth of 26%.

Stocks to Consider

Some better-ranked stocks are Danaher Corporation (DHR - Free Report) , Raven Industries, Inc. (RAVN - Free Report) and Applied Industrial Technologies, Inc. (AIT - 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.

Danaher delivered a positive earnings surprise of 17.00%, on average, in the trailing four quarters.

Raven delivered a positive earnings surprise of 126.84%, on average, in the trailing four quarters.

Applied Industrial delivered a positive earnings surprise of 14.68%, on average, in the trailing four quarters.

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