Shares of Honeywell International Inc (HON) hit a 52-week high of $90.21 during yesterday’s trading session. However, the stock closed the session at $89.72, which reflects a solid year-to-date return of 38.6%. The average trading volume aggregated 2.2 million shares.
Recently, the company updated its outlook in which it expects sales profit margin and earnings to increase in the ensuing year. Its long-term earnings growth of 10.6% and revised guidance are some catalysts driving the stock.
Growth Drivers
Impressive third-quarter 2013 results and disciplined focus on cost and productivity were the primary driving factors for Honeywell.
Honeywell expects sales of $40.3 billion–$40.7 billion in 2014. Despite the challenging environment, the company’s balanced mix of long- and short-cycle businesses, along with organic growth in new products and expansion in high-growth regions augur well on a long-term perspective.
The operational improvements coupled with strong productivity and lucrative investments are all expected to contribute to healthy margin expansion in the long run. The company has already achieved the low end of its margin target in 2013 and expects operating margins for 2014 in the range of 15.3%–15.6%.
Honeywell expects earnings per share in the range of $5.35–$5.55 in 2014, which represents earnings growth of 8.0%–12.0%. The current Zacks Consensus Estimate for 2014 is pegged at $5.55 a share.
Additionally, Honeywell authorized a share repurchase program under which it can repurchase up to $5 billion worth of shares over a period of time through open market transactions. The strategic move signifies an inherent strength in the company’s balance sheet and working capital management that gives it enough confidence to generate adequate cash flow to deliver shareholder value. The company expects free cash flow in the range of $3.8 billion–$4.0 billion for 2014, which represents growth of 4.0%–9.0%.
Honeywell’s diversified business portfolio has the potential to earn consistent above-average returns and mitigate operating risks going forward.
Other Stocks to Consider
Honeywell currently has a Zacks Rank #4 (Sell). Other better-ranked stocks that look promising and are worth a look include Hutchison Whampoa Limited (HUWHY), ITT Corporation (ITT) and Raven Industries Inc (RAVN), each carrying a Zacks Rank #2 (Buy).
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