Honeywell International Inc. - Growth & Income


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.


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

To read this article on click here.

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

Referenced Stocks: HON

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