Honeywell International Inc. - Growth & Income

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Estimates have been rising for Honeywell ( HON ) after the company delivered its 10th consecutive positive earnings surprise.

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 0.9.

Company Description

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 2010.

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 at 24%.

Honeywell's largest segment - Automation & Control Solutions - saw a 4% increase in sales, driven by organic growth across the portfolio.

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.

Outlook

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.

Solid Income

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%:

HON: Honeywell

Reasonable Valuation

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 Zacks Investment Research and Co-Editor of the Reitmeister Value Investor .


 
HONEYWELL INTL ( HON ): Free Stock Analysis Report
 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks

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