Shares of industrial goods manufacturer, Honeywell International Inc.HON hit a 52-week high of $151.10 during yesterday's trading session, before closing a tad lower at $150.43 for a healthy year-to-date return of 29.5%. Barring minor hiccups, the company's share price has steadily been on an uptrend since the second half of April. This Zacks Rank #2 (Buy) stock has the potential for further price appreciation with long-term earnings growth expectations of 9.2%.
Honeywell's diversified business portfolio has the potential to earn consistent above-average returns and mitigate operating risks. The company's diligent focus on working capital management, free cash flow generation and a conservative balance sheet are its key strengths in an enterprising macroeconomic environment.
The company's balanced mix of long- and short-cycle businesses, along with decent organic growth and expansion in high-growth regions augur well for the long term. With a flexible yet disciplined focus on cost and productivity, Honeywell remains focused on increasing its presence in high-growth regions. The company has regularly fine-tuned its portfolio, having sold about 60 of its units (accounting for $7 billion in sales) since 2002 and acquiring 90 companies, contributing $14 billion in revenues over the same period. These factors bode well for for Honeywell's growth in 2017 and beyond.
Honeywell continues to invest in its enterprises to create units that grow faster and are more profitable than its competitors. The acquisition of Elster - a leading provider of thermal gas solutions for commercial, industrial and residential heating systems, and gas, water and electricity meters for $5 billion - is likely to augment revenues. Infrastructure investments and increasing gas consumption in high growth regions like India and China are expected to drive demand for Elster's gas heating assets, strengthening its existing gas combustion portfolio to create a full solution offering. The company has $300 million in its fund for its restructuring initiatives to improve its overall cost position and drive further margin expansion going forward.
Honeywell reportedly has the largest industrial cyber security research capabilities in the industry. The company has hi-tech solutions to protect clients against cyber threats. Two such solutions are Risk Manager - the industry's first solution to proactively monitor, measure and manage industrial cyber security risks - and Secure Media Exchange, which protects plants against threats from removable media such as USB flash drives.
With such state-of-the-art products, Honeywell strives to gain a competitive edge over its rivals and augment revenues. The company reported solid third-quarter results with healthy year-over-year increase in earnings and revenues. Honeywell further revised full-year earnings guidance on favorable growth dynamics. Its earnings per share is currently expected in the range of $7.05-$7.10 (from $7.00-$7.10). All these factors probably raised investor confidence and drove the company's shares to a fresh 52-week high.
Other Stocks to Consider
Other stocks in the industry worth considering include Danaher Corp. DHR , Federal Signal Corp. FSS and Leucadia National Corp. LUK , each carrying a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .
Danaher has a long-term earnings growth expectation of 10.6%. It has surpassed estimates in each of the trailing four quarters with an average positive surprise of 2.6%.
Federal Signal delivered an earnings beat thrice in the trailing four quarters with an average positive surprise of 11.5%.
Leucadia has an expected long-term earnings growth rate of 18%. It has exceeded estimates thrice in the last four quarters with an average beat of 21.2%.
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