Estimates have been rising for
) after the company delivered its 10th consecutive positive
This Zacks #2 Rank (Buy) stock offers investors strong growth and
solid income at a very reasonable price.
Based on current consensus estimates, analysts project 17% EPS
growth in 2012 and 12% growth in 2013. On top of this, the company
pays a dividend that yields a solid 2.6%.
Valuation is attractive too with shares sporting a PEG ratio of
Honeywell International Inc. is a diversified technology and
manufacturing company operating in 4 segments:
Aerospace (31% of total sales)
Automation & Control Solutions (43%)
Performance Materials & Technologies (15%)
Transportation Systems (11%)
The company was founded in 1920 and is headquartered in Morristown,
New Jersey. It has a market cap of $45.0 billion.
Fourth Quarter Results
Honeywell reported strong fourth quarter results on January 27.
Earnings per share came in at $1.05, beating the Zacks Consensus
Estimate by a penny. It was a 21% increase over the same quarter in
Sales rose 8% to $9.5 billion, driven by 7% organic growth. Each
segment saw an increase in sales year-over-year, with the
Performance Materials & Technologies division leading the way
Honeywell's largest segment - Automation & Control Solutions -
saw a 4% increase in sales, driven by organic growth across the
Total segment profit rose 15% year-over-year, driven by a 30%
increase in Performance Materials & Technologies and a 14%
increase in Automation & Control Solutions.
Following a strong 2011, CEO Dave Cote stated "while we expect a
more challenging macro environment ahead in 2012, primarily driven
by softness in Europe impacting the short-cycle businesses, we're
confident that Honeywell is well positioned to continue to
outperform". And he went on to say that the company's "long-cycle
businesses are accelerating".
Analysts mostly revised their earnings estimates higher for both
2012 and 2013, sending the stock to a Zacks #2 Rank (Buy). The
Zacks Consensus Estimate for 2012 is now $4.44, representing 17%
growth over 2011 EPS. The 2013 consensus estimate is currently
$4.95, corresponding with 12% EPS growth.
In addition to strong earnings growth, Honeywell offers investors a
dividend that yields a solid 2.6%.
The company has a history of steadily increasing its dividend, as
you can see below. Since 2000, Honeywell has raised it at a
compound annual growth rate of 6%:
The valuation picture looks very reasonable for HON. Shares trade
at 13.1x 12-month forward earnings, in-line with the industry and a
discount to its 10-year median of 15.2x.
Its PEG ratio is an attractive 0.9 based on a long-term EPS growth
rate of 14.5%.
The Bottom Line
With rising estimates, strong growth projections, a solid 2.6%
dividend yield and reasonable valuation, Honeywell offers investors
a lot to like.
Todd Bunton is the Growth & Income Stock Strategist for
and Co-Editor of the
Reitmeister Value Investor
HONEYWELL INTL (
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