Stocks’ Details
 

Honeywell International Inc.

 
HON Increases Face Mask Manufacturing Capacity: Honeywell International Inc. (NYSE: HON) is a worldwide diversified technology and manufacturing company with a broad range of aerospace products and services. The company has its business operations in Europe, the United States, Canada, Latin America and Asia. On 30 March 2020, the company stated that it has been working on improving its manufacturing capabilities at the Phoenix site to produce N95 face masks, in order to support the U.S. government in fighting the COVID-19 pandemic. In another update, the company also took necessary initiatives to develop its production operations in Smithfield, Rhode Island, to manufacture N95 face masks.
 
4QFY19 Financial Highlights for the Period ended 31 December 2019: During the quarter, the company reported adjusted earnings of $2.06 per share, up 11% year over year, owing to higher organic sales growth. The company reported revenues of $9,496 million in 4QFY19, down 2% year over year, primarily due to theimpact of spin-offs of some of the company’s businesses in FY18. Nevertheless, organically, revenues went up 2% on robust demand for commercial fire and building management products, coupled with strength in its aerospace business. The company reported operating income margin of 17.8%, up 220 basis points year over year.
 

Key Financial Highlight (Source: Company Reports)
 
What to Expect: For FY20, the company expects earnings to be in the range of $8.60-$9.00 per share range. Revenue for FY20 is projected to be between $36.7 billion and $37.8 billion.
 
 
Valuation Methodology: EV/Sales Multiple Based Valuation

EV/Sales Based Valuation (Source: Thomson Reuters)
 
Note: All forecasted figures have been taken from Thomson Reuters, NTM: Next Twelve Months
 
Stock Recommendation: The stock of HON closed at $138.32 with a market capitalization of ~$97.8 billion. The stock made a 52-week low and high of $101.08 and $184.06 and is currently trading close to the average of the trading range. The stock witnessed a sharp correction amid the ongoing panic related to coronavirus and fell 24.5% and 18.2% in the last three months and one year, respectively.The company expects robust demand environment in commercial aerospace business to aid results going, forward. Considering the operational excellence, focused execution, and outlook, we have valued the stock using EV/Sales multiple based illustrative relative valuation method and arrived at a target price which is offering a limited correction of lower single-digit (in % terms). For the purpose, we have considered peers like 3M Co (NYSE: MMM), Zebra Technologies Corp (NASDAQ: ZBRA), and Schneider Electric SE (NASDAQ: SCHN). The company’s Annual General Meeting will be held on 27 April 2020 and results for 1QFY20 are scheduled to be announced on 01 May 2020. Hence, we have a watch stance on the stock at the current market price of $138.32, up 4.53% as on 17 April 2020.
 

American Electric Power Company, Inc.

 
COVID-19 Update: American Electric Power Company, Inc. (NYSE: AEP) is a public utility holding company, which is engaged in generating, transmitting, and distributing electricity, natural gas, and other commodities via direct and indirect owned subsidiaries. Recently, the company stated that it is supporting the measures taken by Governor Michael DeWine and his management to curb the spread of COVID-19. In doing so, the company is ensuring that all its workers and employees will maintain physical distance and will work in smaller teams. Further, the company has restricted visitors to enter the facilities. The company has also donated $1.5 million in emergency funds, including nearly $500,000 in Ohio, in order to aid basic human needs during the COVID-19 crisis.
 
4QFY19 Financial Highlights for the Period Ended 31 December 2019: During the period, the company reported adjusted earnings of 60 cents, which declined in comparison to 72 cents reported in the year-ago quarter. The company reported revenues of $3.6 billion, which declined from the year-ago quarter’s $3.8 billion. The company’soperating expenses in the quarter stood at $2,038.7 million, up from $1,912.8 million in the prior corresponding period. Operating income for the quarter stood at $471.4 million, down from $563.1 million in the previous quarter. At the end of the period, the company’s cash balance amounted to $246.8 million, while long-term debt stood at $25.13 billion. 
 
 

Key Financial Highlight (Source: Company Reports)
 
Outlook: The company reiterated its FY20 outlook and continues to expect operating earnings in the range of $4.25-$4.45 per share. The company further expects to deliver long-term operating earnings growth of 5%-7%.
 
Valuation Methodology: EV/Sales Multiple Based Valuation

EV/Sales Based Valuation (Source: Thomson Reuters)
 
Note: All forecasted figures have been taken from Thomson Reuters, NTM: Next Twelve Months
 
Stock Recommendation: The stock of AEP closed at $86.38 with a market capitalization of ~$42.7 billion. The stock made a 52-week low and high of $65.14 and $104.97 and is currently trading close to the average of the trading range. The stock witnessed a correction of 12% in the last three months.Considering the operational excellence, focused execution, and outlook, we have valued the stock using EV/Sales multiple based illustrative relative valuation method and arrived at the target price with a limited upside (in % terms). For the purpose, we have considered peers like Exelon Corp (NYSE: EXC), Dominion Energy Inc (NYSE: D), and Eversource Energy (NYSE: ES), to name few. The company’s Annual General Meeting will be held on 21 April 2020 and results for 1QFY20 are scheduled to be announced on 23 April 2020. Hence, we have a watch stance on the stock at the current market price of $86.38, up 2.77% as on 17 April 2020. 

American Tower Corporation (REIT)

 
AMT to Redeem All its Outstanding Shares: American Tower Corporation (REIT) (NYSE: AMT) is a top independent operator of wireless communications towers in Brazil India Mexico, Chile, and the Unites States. On 9 April 2020, the company announced its poll to call for redemption of all its outstanding 2.800% senior notes due on May 11, 2020. Notably, AMT plans to fund the redemption with borrowings under its $2.25 billion senior unsecured revolving credit facility and cash on hand balance.
 
4QFY19 Financial Highlights for the Period ended 31 December 2019: During the quarter, the company reported adjusted funds from operations (AFFO) per share of $1.95, down ~1% year on year. The company’s revenues also declined 9.8% year over year and came in at $1.92 billion. Nonetheless, the company saw growth in its organic tenant billing. Both top and bottom line were negatively impacted by non-recurrence of the Tata settlement and Indian carrier consolidation churn. Adjusted EBITDA in 4QFY19 declined 14.6% and came in at $1,217 million. During the period, AMT paid ~$2.6 billion to purchase 8,218 communications sites. At the end of the period, cash flow from operations stood at $994 million, while free cash flow amounted to $719 million. The company exited the period with total liquidity of $4.4 billion. 
 

Key Financial Highlight (Source: Company Reports)
 
Guidance: For FY20, the company predicts revenues to be in the range of $7,975-$8,125 million, signifying a rise of 7.8% at the mid-point. The company expects adjusted EBITDA to be between $5,085-$5,185 million, indicating a rise of 8.2% at mid-point. Consolidated AFFO is projected to be in the ambit of $3,740 - $3,840 million band.
 
Stock Recommendation: The stock of AMT closed at $254.06 with a market capitalization of ~$112.7 billion. The stock made a 52-week low and high of $174.32 and $260.43 and is currently trading towards the upper band of the trading range. The stock has gained 16.98% and 31.69% in the last 1-month and 1-year. The company is likely to announce its 1QFY20 results on 29 April 2020. Hence, considering the financial performance, outlook and current trading levels, we have a watch stance on the stock at the current market price of $254.06, up 0.91% as on 17 April 2020.
 
 
 
Comparative Price Chart (Source: Thomson Reuters)

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