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Here's Why Honeywell (HON) Shares Are Up 23% in 6 Months
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Shares of Honeywell International (HON - Free Report) have gained 23.2% in the past six months, outperforming the industry’s 7.7% increase. The upsurge can be linked to strength in HON’s Aerospace segment owing to a recovery in commercial flight hours. Healthy margin performance owing to pricing actions and cost-control measures is also expected to have driven the stock’s performance.
Six-Month Price Performance
Image Source: Zacks Investment Research
Strong commercial aftermarket demand owing to a recovery in commercial flight hours is aiding Honeywell’s Aerospace segment. Continued improvement in flight hours and build rates should drive the segment’s performance. For the full year, the company expects Aerospace sales to increase in mid-single-high single digits year over year.
Strong fire products and building management system sales are driving growth of the Building Technologies segment. HON predicts double-digit organic sales growth for the segment in 2022. Strength in advanced materials business and UOP operations is fueling growth of the Performance Materials and Technologies segment. UOP business growth is led by strength in gas processing orders, while strong demand in the Marine Products business is a key growth driver for Advanced Materials.
Investments in digital transformation, aimed at driving commercial and operational actions, are helping in margin expansion. Segment margin expanded 60 basis points year over year to 21.8% in the third quarter. Pricing actions and cost-control measures are also supporting the company’s margin performance. Honeywell expects a segment margin of 21.6-21.8% for 2022 compared with 21.3-21.7% anticipated earlier.
For the fourth quarter, the company expects sales to increase 10-13% on an organic basis. For the full year, Honeywell expects organic growth of 6-7%. Adjusted earnings are estimated to jump 18-22% year over year in the fourth quarter. For the full year, the company improved its adjusted earnings per share guidance to $8.70-$8.80 from $8.55-8.80 expected earlier. This indicates year-over-year growth of 8-9%.
Honeywell’s consistent measures to reward its shareholders through dividends and share buybacks also boosted the stock’s performance. In the first nine months of 2022, Honeywell rewarded shareholders with $2.8 billion through share repurchases.
For 2022, the company expects to buy back shares worth at least $4 billion. The quarterly dividend rate was hiked by 5.1% in September 2022, marking its 13th increment since 2010. Strong free cash flow generation supports the company’s shareholder-friendly activities. It expects a free cash flow of $4.70-$5.10 billion in 2022.
Zacks Rank & Key Picks
Honeywell presently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks worth considering are as follows:
Applied Industrial has an estimated earnings growth rate of 14.3% for the current fiscal year. The stock has gained 40.4% in the past six months.
IDEX Corporation (IEX - Free Report) presently carries a Zacks Rank #2 (Buy). The company pulled off a trailing four-quarter earnings surprise of 5.7%, on average.
IDEX has an estimated earnings growth rate of 28.4% and 6.1% for the current and next years, respectively. The stock has rallied 29.2% in the past six months.
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Here's Why Honeywell (HON) Shares Are Up 23% in 6 Months
Shares of Honeywell International (HON - Free Report) have gained 23.2% in the past six months, outperforming the industry’s 7.7% increase. The upsurge can be linked to strength in HON’s Aerospace segment owing to a recovery in commercial flight hours. Healthy margin performance owing to pricing actions and cost-control measures is also expected to have driven the stock’s performance.
Six-Month Price Performance
Image Source: Zacks Investment Research
Strong commercial aftermarket demand owing to a recovery in commercial flight hours is aiding Honeywell’s Aerospace segment. Continued improvement in flight hours and build rates should drive the segment’s performance. For the full year, the company expects Aerospace sales to increase in mid-single-high single digits year over year.
Strong fire products and building management system sales are driving growth of the Building Technologies segment. HON predicts double-digit organic sales growth for the segment in 2022. Strength in advanced materials business and UOP operations is fueling growth of the Performance Materials and Technologies segment. UOP business growth is led by strength in gas processing orders, while strong demand in the Marine Products business is a key growth driver for Advanced Materials.
Investments in digital transformation, aimed at driving commercial and operational actions, are helping in margin expansion. Segment margin expanded 60 basis points year over year to 21.8% in the third quarter. Pricing actions and cost-control measures are also supporting the company’s margin performance. Honeywell expects a segment margin of 21.6-21.8% for 2022 compared with 21.3-21.7% anticipated earlier.
For the fourth quarter, the company expects sales to increase 10-13% on an organic basis. For the full year, Honeywell expects organic growth of 6-7%. Adjusted earnings are estimated to jump 18-22% year over year in the fourth quarter. For the full year, the company improved its adjusted earnings per share guidance to $8.70-$8.80 from $8.55-8.80 expected earlier. This indicates year-over-year growth of 8-9%.
Honeywell’s consistent measures to reward its shareholders through dividends and share buybacks also boosted the stock’s performance. In the first nine months of 2022, Honeywell rewarded shareholders with $2.8 billion through share repurchases.
For 2022, the company expects to buy back shares worth at least $4 billion. The quarterly dividend rate was hiked by 5.1% in September 2022, marking its 13th increment since 2010. Strong free cash flow generation supports the company’s shareholder-friendly activities. It expects a free cash flow of $4.70-$5.10 billion in 2022.
Zacks Rank & Key Picks
Honeywell presently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks worth considering are as follows:
Applied Industrial Technologies, Inc. (AIT - Free Report) presently sports a Zacks Rank #1 (Strong Buy). AIT delivered a trailing four-quarter earnings surprise of 24.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks.
Applied Industrial has an estimated earnings growth rate of 14.3% for the current fiscal year. The stock has gained 40.4% in the past six months.
IDEX Corporation (IEX - Free Report) presently carries a Zacks Rank #2 (Buy). The company pulled off a trailing four-quarter earnings surprise of 5.7%, on average.
IDEX has an estimated earnings growth rate of 28.4% and 6.1% for the current and next years, respectively. The stock has rallied 29.2% in the past six months.