Earnings Analysis: Honeywell (HON)
On Friday, Honeywell announced third quarter results for fiscal 2017. After preannouncing results last week there's not a lot of new information here, so my analysis will likely be fairly brief. Headlines will say that the company met expectations, but that's only after the new expectations were set with the preannounced results. The company delivered earnings of $1.75, which were at the high end of their guidance in July. Sales came in at $10.1B with organic growth of 5%, led in part by aerospace. It was back at the beginning of the year that everyone was panicking as to whether the company would be able to get any organic growth. Free cash flow growth was excellent at 18%, providing plenty of funding for the spinoffs that were just announced.
Fourth quarter projections continue this growth as the company expects to have 4% - 6% organic revenue growth resulting in earnings in the range of $1.79 - $1.84. To put things simply, the spinoffs are going to allow Honeywell to get a little bit smaller and more nimble. They'll have the cash to focus on growth and are entering a time in the economic cycle where industrial conglomerates like this tend to shine. I'm slightly increasing my earnings target for 2018 to $7.81 (this assumes structure as it stands today). Because of the growth capacities and unlocked value I anticipate from the spinoffs, though, I am increasing my multiple to 21. This increases my price target to $164. This management team continues to do everything right from an investor's perspective. I expect this trend to continue and for the stock to continue to out perform the S&P 500 and its sector.
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. Ratings are based upon 12-18 month outlook on stock direction and not necessarily related to moves I make due to financial positioning.
Fourth quarter projections continue this growth as the company expects to have 4% - 6% organic revenue growth resulting in earnings in the range of $1.79 - $1.84. To put things simply, the spinoffs are going to allow Honeywell to get a little bit smaller and more nimble. They'll have the cash to focus on growth and are entering a time in the economic cycle where industrial conglomerates like this tend to shine. I'm slightly increasing my earnings target for 2018 to $7.81 (this assumes structure as it stands today). Because of the growth capacities and unlocked value I anticipate from the spinoffs, though, I am increasing my multiple to 21. This increases my price target to $164. This management team continues to do everything right from an investor's perspective. I expect this trend to continue and for the stock to continue to out perform the S&P 500 and its sector.
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. Ratings are based upon 12-18 month outlook on stock direction and not necessarily related to moves I make due to financial positioning.
Nothing on this site should be taken as advice, research, or an invitation to buy or sell any securities. All views expressed are solely of my own and I am not a professional money manager. Please consult with your financial adviser before taking any action in your own portfolio.
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