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Honeywell (HON) Up 21% in a Year: Will the Momentum Continue?
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Shares of Honeywell International (HON - Free Report) have gained 20.8% in a year outperforming the industry’s 8.6% increase. The upside can be linked primarily to strength in the cyber, industrial, aerospace and connected building end markets, solid operational execution and improving supply chains.
Image Source: Zacks Investment Research
What’s Aiding Honeywell?
Strong commercial aftermarket demand owing to a recovery in commercial flight hours is aiding Honeywell’s Aerospace segment. With improvement in supply chains and strength in order book, the company expects organic sales to increase in low double digits for the Aerospace segment in 2023.
Strength in advanced materials business and UOP operations is fueling growth of the Performance Materials and Technologies (PMT) segment. Honeywell expects strength in projects and smart energy businesses to support the segment’s growth in 2023. It expects sales to increase in mid-single digits for the segment in 2023. Within PMT, demand for flooring products is expected to buoy the advanced materials business’ performance. Robust demand for gas processing equipment and sustainable technology solutions is likely to boost the UOP business operations in 2023.
Growth in Building Products and Solutions augurs well for the Building Technologies segment. Institutional demand in airports, healthcare and education is expected to drive growth of the segment in 2023. Honeywell expects organic revenues to increase in low single digits for the segment in the current year.
Despite cost inflation, pricing actions and cost-control measures are driving Honeywell’s margin performance. For the first quarter of 2023, operating margin expanded 390 basis points (bps) to 19.1%. Segment margin expanded 90 bps in the quarter. For 2023, the company expects a segment margin of 22.3-22.6%, indicating a year-over-year rise of 60-90 bps.
Handsome rewards to shareholders also drove Honeywell’s shares higher. In 2022, HON rewarded shareholders with $2.7 billion in dividends and $4.2 billion in share buybacks. The quarterly dividend rate was hiked by 5.1% in September 2022, marking its 13th increment since 2010. In the first quarter of 2023, the company paid dividends of $725 million and repurchased shares worth approximately $800 million. Strong free cash flow generation supports the company’s shareholder-friendly activities. The company expects an operating cash flow of $4.9-$5.3 billion for 2023, while free cash flow is anticipated to be $3.9-$4.3 billion.
Will the Uptrend in Shares Continue?
Persistent weakness in the manufacturing sector, raw material cost inflation and labor market challenges might be a drag on Honeywell’s operations. However, strength across key end markets is likely to help the company stay afloat. Investments in digital transformation, aimed at driving commercial and operational actions, augur well for the company’s growth.
HON’s deal to acquire Compressor Controls Corporation holds promise. The acquisition will fortify HON’s expertise in industrial control, automation and process solutions, while simultaneously bolstering its sustainability portfolio with new carbon capture control solutions. The acquired entity will be integrated into HON’s Process Solutions business. The deal is expected to close in the second half of 2023.
With market conditions remaining strong, Honeywell expects strong sales of $36.5-$37.3 billion in 2023. Previously, the company anticipated sales of $36-$37 billion. The company expects organic sales growth of 3-6% in the year compared with 2-5% estimated earlier. Honeywell expects adjusted earnings per share of $9-9.25, suggesting a year-over-year rise of 3-6% (an increase of 0-5% was predicted earlier).
Zacks Rank & Other Stocks to Consider
Honeywell currently carries a Zacks Rank #2 (Buy).
Enersys has an estimated earnings growth rate of 28.1% for the current year. Shares of the company have surged approximately 89.5% in a year.
Xylem Inc. (XYL - Free Report) currently carries a Zacks Rank #2. The company delivered a trailing four-quarter earnings surprise of 17.7%, on average.
Xylem has an estimated earnings growth rate of 21.7% for the current year. Shares of the company have jumped 43.3% in a year.
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Honeywell (HON) Up 21% in a Year: Will the Momentum Continue?
Shares of Honeywell International (HON - Free Report) have gained 20.8% in a year outperforming the industry’s 8.6% increase. The upside can be linked primarily to strength in the cyber, industrial, aerospace and connected building end markets, solid operational execution and improving supply chains.
Image Source: Zacks Investment Research
What’s Aiding Honeywell?
Strong commercial aftermarket demand owing to a recovery in commercial flight hours is aiding Honeywell’s Aerospace segment. With improvement in supply chains and strength in order book, the company expects organic sales to increase in low double digits for the Aerospace segment in 2023.
Strength in advanced materials business and UOP operations is fueling growth of the Performance Materials and Technologies (PMT) segment. Honeywell expects strength in projects and smart energy businesses to support the segment’s growth in 2023. It expects sales to increase in mid-single digits for the segment in 2023. Within PMT, demand for flooring products is expected to buoy the advanced materials business’ performance. Robust demand for gas processing equipment and sustainable technology solutions is likely to boost the UOP business operations in 2023.
Growth in Building Products and Solutions augurs well for the Building Technologies segment. Institutional demand in airports, healthcare and education is expected to drive growth of the segment in 2023. Honeywell expects organic revenues to increase in low single digits for the segment in the current year.
Despite cost inflation, pricing actions and cost-control measures are driving Honeywell’s margin performance. For the first quarter of 2023, operating margin expanded 390 basis points (bps) to 19.1%. Segment margin expanded 90 bps in the quarter. For 2023, the company expects a segment margin of 22.3-22.6%, indicating a year-over-year rise of 60-90 bps.
Handsome rewards to shareholders also drove Honeywell’s shares higher. In 2022, HON rewarded shareholders with $2.7 billion in dividends and $4.2 billion in share buybacks. The quarterly dividend rate was hiked by 5.1% in September 2022, marking its 13th increment since 2010. In the first quarter of 2023, the company paid dividends of $725 million and repurchased shares worth approximately $800 million. Strong free cash flow generation supports the company’s shareholder-friendly activities. The company expects an operating cash flow of $4.9-$5.3 billion for 2023, while free cash flow is anticipated to be $3.9-$4.3 billion.
Will the Uptrend in Shares Continue?
Persistent weakness in the manufacturing sector, raw material cost inflation and labor market challenges might be a drag on Honeywell’s operations. However, strength across key end markets is likely to help the company stay afloat. Investments in digital transformation, aimed at driving commercial and operational actions, augur well for the company’s growth.
HON’s deal to acquire Compressor Controls Corporation holds promise. The acquisition will fortify HON’s expertise in industrial control, automation and process solutions, while simultaneously bolstering its sustainability portfolio with new carbon capture control solutions. The acquired entity will be integrated into HON’s Process Solutions business. The deal is expected to close in the second half of 2023.
With market conditions remaining strong, Honeywell expects strong sales of $36.5-$37.3 billion in 2023. Previously, the company anticipated sales of $36-$37 billion. The company expects organic sales growth of 3-6% in the year compared with 2-5% estimated earlier. Honeywell expects adjusted earnings per share of $9-9.25, suggesting a year-over-year rise of 3-6% (an increase of 0-5% was predicted earlier).
Zacks Rank & Other Stocks to Consider
Honeywell currently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks are as follows:
Enersys (ENS - Free Report) presently flaunts a Zacks Rank #1 (Strong Buy). The company delivered a trailing four-quarter earnings surprise of 8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
Enersys has an estimated earnings growth rate of 28.1% for the current year. Shares of the company have surged approximately 89.5% in a year.
Xylem Inc. (XYL - Free Report) currently carries a Zacks Rank #2. The company delivered a trailing four-quarter earnings surprise of 17.7%, on average.
Xylem has an estimated earnings growth rate of 21.7% for the current year. Shares of the company have jumped 43.3% in a year.