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Honeywell (HON) Rides on Business Strength Amid Headwinds

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Honeywell International Inc. (HON - Free Report) has been benefiting from strength in its commercial aviation original equipment and aftermarket businesses, driven by solid demand in the aviation market. Also, solid momentum in the company’s defense and space business owing to stable U.S. and international defense spend volumes has been driving its Aerospace segment.

The company’s Building Automation segment has been gaining from strong demand for building solutions and a robust backlog level. Strength in advanced materials and UOP businesses bodes well for HON’s Energy & Sustainability Solutions segment.

Management remains focused on acquiring businesses to gain access to new customers, regions and product lines. In March 2024, it announced its intention to acquire Civitanavi Systems S.p.A. for about $217 million to boost its portfolio of aerospace navigation solutions.

Also, in December 2023, the company entered a deal to acquire Carrier’s Global Access Solutions business for an all-cash deal of $4.95 billion. This acquisition positions HON to become a leading provider of security solutions for the digital age. In the first quarter of 2024, buyouts boosted the Industrial Automation segment’s sales by 1%.

HON remains focused on rewarding shareholders through dividend payouts and share repurchases. For instance, in the first three months of 2024, it paid out dividends of $703 million and repurchased shares worth $671 million. Also, the quarterly dividend rate was hiked by 5% in September 2023.

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In the past three months, the Zacks Rank #3 (Hold) company has gained 4% against the industry’s decline of 0.2%.

However, persistent softness across its warehouse and workflow solutions, and productivity solutions and services businesses has been affecting the Industrial Automation segment's performance. In first-quarter 2024, the segment’s sales declined 12% on a year-over-year basis.

High debt levels have also been major concerns for HON as it raises financial obligations and might drain its profitability. Honeywell exited the first quarter with long-term debt of $22.2 billion, up from $16.6 billion at 2023-end. Also, interest expenses and other financial charges in the quarter remained high at $220 million. Notably, the increase in its debt level was primarily attributable to the fund raised for the Carrier acquisition.

Key Picks

Some better-ranked stocks from the same space are discussed below.

Carlisle Companies Incorporated (CSL - Free Report) presently sports a Zacks Rank #1 (Strong Buy). It has a trailing four-quarter average earnings surprise of 17%. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for CSL’s 2024 earnings has increased 5.8% in the past 60 days.

ITT Inc. (ITT - Free Report) currently carries a Zacks Rank of 2 (Buy). It delivered a trailing four-quarter average earnings surprise of 6.5%.

In the past 60 days, the Zacks Consensus Estimate for ITT’s 2024 earnings has inched up 1.2%.

Griffon Corporation (GFF - Free Report) presently carries a Zacks Rank of 2. It delivered a trailing four-quarter average earnings surprise of 33.5%.

In the past 60 days, the Zacks Consensus Estimate for GFF’s 2024 earnings has increased 4.8%.

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