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Analyst Blog

On Oct 3, Zacks Investment Research updated the research report on industrial goods manufacturer, Honeywell International Inc. (HON - Analyst Report) .

Honeywell recently completed the acquisition of leading supply chain and warehouse automation firm Intelligrated for $1.5 billion. Post-integration, Intelligrated will form an integral part of Honeywell's Sensing and Productivity Solutions (S&PS) unit in its Automation and Control Solutions business.

The deal is a strategic fit to Honeywell’s S&PS unit with complementary products. Intelligrated offers a holistic support to retailers, manufacturers and logistics providers through a right mix of state-of-the-art products and after-market services to build smarter distribution and fulfillment operations. Intelligrated solutions will offer Honeywell a competitive edge through increased flexibility, efficiency and accuracy. This could be achieved through its high-performance solutions that utilize innovative concepts with industry-leading automation equipment and software to optimize productivity and faster delivery. Its management expertise is also likely to enrich the human capital.

Over the years, Honeywell has regularly fine-tuned its portfolio, having sold about 60 of its units (accounting for $7 billion in sales) since 2002 and acquiring another 90 companies contributing $14 billion in revenue over the same period. The company’s balanced mix of long- and short-cycle businesses, along with a decent organic growth in new products and expansion in high-growth regions augur well for the long term.

In order to spur growth and realign its operations, Honeywell is reportedly considering plans to build a software development center in Atlanta as well as relocate a key divisional headquarter to the city. The twin moves are expected to cost approximately $19 million and will involve about 800 employees.

Honeywell already has a rich presence in Georgia with about 1,000 employees spread across 11 locations in the state. According to the company officials, the state of Georgia and Atlanta city in particular has offered $2 million in grants and $10 million in tax credits to attract more investments.

Accordingly, Honeywell has decided to shift the headquarters of its Home and Building Technologies division to Atlanta. In addition, the company is likely to build a new software development center that will focus on technology for planes, cars, homes and other buildings. While the software development center plans to employ around 730 people within a few years, the Home and Building Technologies headquarters will likely have around 100 employees.

We remain encouraged by the inherent growth potential of this Zacks Rank #3 (Hold) stock. Some better-ranked stocks in the industry include Raven Industries Inc. (RAVN - Analyst Report) , Sumitomo Corporation (SSUMY - Snapshot Report) and Barloworld Ltd. (BRRAY - Snapshot Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Raven has a long-term earnings growth expectation of 10% and is currently trading at a forward P/E of 46.1x.

Sumitomo has a long-term earnings growth expectation of 5% and is currently trading at a forward P/E of 11.5x.

Barlow has a long-term earnings growth expectation of 7% and is currently trading at a forward P/E of 9.7x.

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