Honeywell International Inc.

HON Details

Honeywell International Inc. (NASDAQ: HON) is a software-industrial-focused technology solutions provider. Its operating segment are 1) Aerospace, which offers aircraft-related products, software, and services to OEMs and other clients in several industries, 2) Honeywell Building Technologies, which makes products, software, solutions, and technologies that assist building owners and occupiers keep their buildings safe, energy-efficient, sustainable, and productive, 3) Performance Materials and Technologies develops and manufactures performance chemicals, materials, process technologies, and automation systems and 4) Safety and Productivity Solutions segment offers products and software that improve customers' productivity, workplace safety, and asset performance.

Latest News:

• Collaboration of HON and ENLC: HON and EnLink Midstream, LLC announced on June 9, 2022, that they would collaborate to provide carbon capture solutions to industrial-scale carbon dioxide (CO2) emitters in the United States Gulf Coast region.

Q1FY22 Results Highlights:

• Q-o-Q Revenue Performance: Due to significant macro challenges, the company's revenue was USD 8.38 billion in Q1 FY22 compared to USD 8.45 billion in Q1 FY21. Demand, on the other hand, remained strong, with orders up 13% year over year and long-cycle orders up over 20%, helping to drive growth.
• Net Income, Margins and Profitability: Due to flat revenue and higher operating expenses, the company's net income was USD 1.13 billion in Q1 FY22 compared to USD 1.45 billion in Q1 FY21. However, EBITDA margins were 27.1% in Q1 FY22 vs 27.4% in Q1 FY21, better than the industry median, with a 6.1% higher equity return than the industry median.
• Leveraging Strong Balance Sheet: In Q1 FY22, the company used USD 2.0 billion of total capital, with USD 1.0 billion share repurchase and a commitment to buy back USD 4 billion in shares by 2022. Regarding mergers and acquisitions, HON completed the acquisition of U.S. Digital Designs, a provider of public safety communications hardware and software solutions.
  

FY 2022 Outlook:

(Source: Company Filings) 

FY 2022 Segment Outlook:

(Source: Company Filings)

Key Risks:

• Operational Risks: Price changes in raw materials, inflation, the ability of key suppliers to satisfy quality and delivery criteria, and catastrophic occurrences can all raise the cost of the products and services, damage the ability to meet customer obligations, and result in significant liabilities.
  

Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation

(Source: Analysis by Kalkine Group)

Stock Recommendation:

Honeywell delivered a strong start to 2022, meeting or exceeding expectations in the first quarter despite considerable new macroeconomic challenges and the ongoing impact of supply chain constraints. Organic sales growth was underpinned by double-digit growth in their commercial aviation aftermarket, building products, productivity solutions and services, and advanced materials businesses. Demand remained strong, with orders up 13% year over year and long-cycle orders growth of over 20%, which will help drive growth as they progress through 2022.

Based on the revenue performance, robust order backlog, decent margins, optimistic outlook, segment outlook, associated risks, and current valuation, we recommend a "Hold" rating on the stock at the current market price of USD 180.61 as of June 17, 2022, at 07:21 AM PDT.

1-Year Technical Price Chart (as of June 17, 2022, at 07:21 AM PDT). Source: REFINITIV, Analysis by Kalkine Group 

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors' appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above. 

Note 3: The report publishing date is as per the Pacific Time Zone.

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