By laksh5382 
Dow stock Honeywell was one of the biggest decliners on the 30-stock average on Thursday, after the club industrial giant reported mixed third-quarter results with a mixed outlook. Revenue for the three months ended Sept. 30 rose 5.6% year-on-year to $9.73 billion, but missed the consensus estimate of $9.9 billion compiled by LSEG. Adjusted earnings per share rose 8.4% to $2.58 and beat the consensus forecast of $2.50. EPS was also above the high level of guidance previously provided by management. HON YTD Mountain Honeywell The 4.5% decline in YTD Honeywell shares following the release was understandable but it represents an opportunity. This is because we are encouraged by the setup in 2025. Thursday’s pullback is worth a buy – and so, we’re reiterating our #1 rating and $235 per share price target. The Bottom Line While sales were down in the third quarter, strong execution and management’s focus on cost discipline led to better-than-expected profits. Cash flow generation was also a bright spot. We believe the team under new CEO Vimal Kapoor is positioning Honeywell for future success, despite some setbacks. Delays in project-based businesses, less progress in short-cycle recovery and supply chain disruptions forced management to adjust its outlook for the remainder of the year. Short business cycles mean quick turnaround from order to delivery. The ability to place orders and take delivery immediately makes short-cycle businesses more responsive to the economy. Honeywell Why we own it: Honeywell is a provider of industrial technology solutions to companies in a variety of industries. We appreciate its performance in the aerospace industry as a parts supplier. However, the portfolio has become a bit bloated. We believe there will be greater benefits from divesting the company’s non-core businesses and management focusing both internal investment and acquisition efforts around three targeted mega trends: automation, the future of aviation, and the energy transition. Competitors: Emerson Electric, RTX, 3M Weight in Portfolio: 3.14% Latest Purchase: April 10, 2024 Started: July 5, 2020 Honeywell has proven to be a disappointing holding. Every time a stock looks like it might be on the verge of a real breakout, we find some reason to sell it. That said, we’ve seen a series of high lows over the past year – likely an acknowledgment that the business is strengthening as the portfolio has been reshaped even in a tough operating environment. Comment While there is still a look for short-cycle business to pick up and future orders to materialize, some of the third quarter disappointment is a result of things slipping away. However, Honeywell realized a book-to-bill ratio of 1.1x due to 2% organic growth in orders. As a result, the company exited the third quarter with another record backlog of $34 billion, up 10% from a year earlier. On the post-earnings conference call, Kapoor highlighted the closing of four major acquisitions for the company: Carrier’s security business, CivitasNavi, CAES Systems, and Air Products’s LNG operations. “All four deals fit seamlessly into our portfolio, enhancing our capabilities in automation, aerospace and energy transition and enhancing our growth trajectory,” he said. These purchases, valued at $9 billion, are expected to add approximately $2 billion to annual sales. Kuper also reminded investors about Honeywell’s plan to spin off its advanced materials business and sell its personal protective equipment business, which he hopes will increase Honeywell’s organic growth rate and profitability. Kapoor also said, “We plan to return to margin expansion again in 2025 as the combination of volume, leverage and productivity actions across the portfolio should offset modest mix headwinds from OEMs in aerospace.” [original equipment manufacturer] CAES” and its defense electronics technology activity and integration. Segment margin, similar to adjusted operating income margin, increased slightly to 23.6% in Q3 and beat estimates. Management’s guidance for the current quarter is consistent with Honeywell’s fiscal 2024 The fourth quarter was mixed as earnings per share fell short of expectations at the midpoint, however, as the company did not get much credit for the EPS increase because it came from so-called bottom-line items, which are pension income and non-taxable income. Operating considerations like tax adjustments, as well, these benefits were offset by what the company said, “decreased segment profit driven primarily by industrial automation and aero volumes,” which certainly impacted operations, demand. Management made several revisions to its outlook for the year, with sales being downgraded as the company’s short cycle recovery was not as fast as expected. Short-cycle business demand has been the swing factor in terms of acquisitions throughout the year. Additionally, there were some unexpected delays in the UOP Petrochemicals business in the Energy and Sustainability Solutions segment and manufacturing disruptions in Aerospace Technologies. Although details were limited, Kapoor did provide some more upbeat comments on his expectations in 2025. Specifically, he directed all four operating segments – Aerospace Technologies, Industrial Automation, Building Automation, and Energy and Sustainability Solutions – to realize organic growth. 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Honeywell International Inc. Signage of is displayed on a monitor on the floor of the New York Stock Exchange (NYSE) in New York.
Michael Nagel | Bloomberg | getty images
dow stock honeywell The 30-stock average had one of the biggest declines on Thursday, when the club industrial giant reported mixed third-quarter results with a mixed outlook.