On Aug 24, Zacks Investment Research updated the research report on industrial goods manufacturer Honeywell International Inc. (HON - Free Report) .
A diligent focus on working capital management, free cash flow generation and a conservative balance sheet amid a challenging macroeconomic environment remain key positive attributes for Honeywell. The company’s diversified business portfolio mitigates operating risks and has historically earned consistent above-average returns to fuel its growth engine.
In addition, Honeywell continues to accelerate investments in the connected home space where it has a strong installed base and market channel. The company is actively investing in capacity expansion and new product rollouts and resources to fend off competition. In Process Solutions, it recently announced a partnership with Intel Corporation (INTC - Free Report) to help bolster protection of critical industrial infrastructure and data, combining the latest advances in cyber-security technology with unique industrial process knowledge. Per the collaboration, Honeywell will integrate Intel Security’s McAfee technologies into its Industrial Cyber Security Solutions. This is intended to safeguard Honeywell’s clients and their control systems from malware and abuse with the use of improved security software, thereby generating incremental revenues.
The company’s balanced mix of long- and short-cycle businesses, along with decent organic growth and expansion in high-growth regions augur well for the long term. With a flexible yet disciplined focus on cost and productivity, Honeywell remains focused on increasing its presence in core markets. Population growth, urbanization and infrastructure development continue to create attractive opportunities across its entire portfolio. Additionally, the company is building a robust pipeline of new products. All these factors bode well for accelerated growth for Honeywell in 2015.
However, Honeywell faces some headwinds that could restrict its growth momentum to some extent. Although the company’s proactive restructuring initiatives have positioned it to navigate better than many of its peers, it is yet to witness signs of stabilization in a number of its major end markets. A change in the U.S. government’s defense and aerospace funding could also adversely impact sales of Aerospace’s defense and space-related products and services. The high research and development costs could further be a drag on the Aerospace segment margin and affect its profitability.
Honeywell currently has a Zacks Rank #3 (Hold). A couple of better-ranked stocks in the industry include Graco Inc. (GGG - Free Report) and Illinois Tool Works Inc. (ITW - Free Report) , both carrying a Zacks Rank #2 (Buy).
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