Stock Analysis: Honeywell (HON)

Notes:
Stock Ratings: 1 = buy at current stock prices, 2 = buy on a 5-10% dip in stock price, 3 = sell on a 5-10% increase in stock price, 4 = sell at current stock prices to raise cash

Today Honeywell posted their 2014 fiscal first quarter earnings numbers.  Earnings beat expectations by 2 cents and revenues were in line despite Defense and Space performing a little worse than expected.  Additionally they guided higher on the year by raising the lower end of their guidance from $5.35 to $5.40.  Upper end of the range has remained unchanged.  On a quarter that historically is a little on the weaker side on the year as a whole, this quarter's results were rather impressive.  As expected, management continues to under promise and over deliver.  I think it's important not to let these beats get you overly joyful, though.  Despite management's guidance, the analyst community is actually near the top of guidance with a year-end EPS of $5.54.  With that being the case, it wouldn't take much for the stock price to get hit.  Current stock prices and earnings estimates leaves the stock right around 17 times earning.  Something quite respectable for this sector as well as quite fairly priced for a company that is growing at a rate around 10%.  The company is well aligned to macro themes around safety, energy efficiency and the Oil & Gas boom in the US.  They're seeing acceleration of growth in Europe and China sales have been consistent to strong.  At this time, the company is in the sweet spot to the global growth macro, and is doing a great job investing in the company for future efforts.  The story is intact, and not much has really change.  The biggest risk is clearly that something suddenly goes wrong, but this management team has a great grasp on their markets and their business.  There's a better chance that the stock would get hit for reasons not related to company performance. 

My Stock Plans:
There's no question in my mind that you should buy stock if it pulls back 5-10%.  My price target remains at $100, but I think that's more of an 18 month target considering current estimates and market conditions.  Only reasons I would sell this stock is if I'm in need of cash, the stock becomes to large of a portion of my portfolio, or market conditions change such that I expect a significant pullback that I should lock in my gains and buy back later.  For now, I don't see any of those conditions to be likely.  I maintain this stock rating at a 2.