BATON ROUGE, LOUISIANA – OCTOBER 9, 2023: Honeywell Specialty Materials, at 2966 Lupine Ave, Baton … [+]
Honeywell (NYSE: HON) reported its Q3 outcomes final month, with revenues aligning and earnings beating the road estimates, and we imagine that HON inventory has ample room for development, as mentioned under. The firm reported income of $9.2 billion and adjusted revenue of $2.27 per share in comparison with the consensus estimates of $9.2 billion in gross sales and $2.23 earnings per share. In this be aware, we focus on Honeywell’s inventory efficiency, key takeaways from its current outcomes, and valuation.
HON inventory has seen a decline of 15% from ranges of $215 in early January 2021 to round $180 now, vs. a rise of about 15% for the S&P 500 over this roughly 3-year interval. However, the lower in HON inventory has been removed from constant. Returns for the inventory have been -2% in 2021, 3% in 2022, and -15% in 2023. In comparability, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 14% in 2023 – indicating that HON underperformed the S&P in 2021 and 2023.
In truth, constantly beating the S&P 500 – in good occasions and dangerous – has been troublesome over current years for particular person shares; for heavyweights within the Industrials sector, together with UNP, GE, and UPS, and even for the megacap stars GOOG, TSLA, and MSFT.
In distinction, the Trefis High Quality Portfolio, with a set of 30 shares, has outperformed the S&P 500 annually over the identical interval. Why is that? As a gaggle, HQ Portfolio shares supplied higher returns with much less threat versus the benchmark index, much less of a roller-coaster experience, as evident in HQ Portfolio efficiency metrics.
Given the present unsure macroeconomic setting with excessive oil costs and elevated rates of interest, might HON face an analogous state of affairs because it did in 2021 and 2023 and underperform the S&P over the subsequent 12 months – or will it see a restoration? From a valuation perspective, HON inventory appears to be like prefer it has room for development. We estimate Honeywell’s Valuation to be $219 per share, reflecting an 18% upside from its present ranges of $185. Our forecast is predicated on a 24x P/E a number of for HON and anticipated earnings of $9.19 on a per-share and adjusted foundation for the total 12 months 2023. The 24x P/E ratio aligns with the corporate’s final four-year common. The firm revised its earnings outlook to be within the vary of $9.10 and $9.20 (vs. the $9.05 and $9.25 vary earlier).
Honeywell’s income of $9.2 billion in Q3 was up 3% y-o-y, led by an 18% rise in Aerospace and a 5% rise in Performance Materials, whereas Safety & Productivity phase gross sales fell 24%. Commercial aviation demand drove the Aerospace phase gross sales, whereas softness within the warehouse automation market weighed on the Safety & Productivity phase. The firm expects its full-year 2023 gross sales to be between $36.8 billion and $37.1 billion, in contrast with the $36.7 billion and $37.3 billion vary anticipated earlier. Honeywell noticed its working margin increase 140 bps to twenty.9% in Q3’23. High revenues and margin growth resulted in adjusted earnings of $2.27 per share versus the $2.25 determine it reported within the prior-year quarter.
HON inventory trades at 20x ahead earnings in comparison with its final four-year common of a bit over 24x, and we imagine it might probably see increased ranges going ahead. The firm ought to proceed to learn from a strong demand setting for its aerospace enterprise. The development might stay tepid for its different companies amid difficult macroeconomic elements.
While HON inventory seems to have room for development, it’s useful to see how Honeywell’s Peers fare on metrics that matter. You will discover different useful comparisons for corporations throughout industries at Peer Comparisons.
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