Honeywell International Inc. HON recently announced that its unit, Honeywell UOP, has clinched a contract from IRPC PLC to offer a range of advanced process technologies for IRPC’s new aromatics complex in Rayong Province, Thailand. The complex is designed to convert IRPC’s available intermediate feedstocks to higher-value aromatics products like benzene and paraxylene.
Per the contract, Honeywell UOP will be responsible for providing technology licensing, design, key equipment as well as state-of-the-art catalysts and adsorbents. Notably, Honeywell UOP will offer some of its advanced technologies like UOP Sulfolane technology, UOP Isomar technology as well as UOP Tatoray technology. Scheduled to be completed in 2022, the complex is expected to produce 1.2 million metric tons of paraxylene per year. It will also enhance the site’s production capacity of benzene from 114,000 to 495,000 tons annually.
Existing Business Scenario
Honeywell is well-positioned to benefit from long-term expansion in markets like — aerospace, facility automation and automotive turbochargers — backed by its strong market share and product line-up. Meanwhile, the company continues to invest in innovative technologies that will help it maintain its leadership position. Also, the demand for the company's construction, automobiles and airplanes products are likely to grow owing to expansion of emerging markets.
Moreover, the company’s balanced mix of long- and short-cycle businesses along with a decent organic growth in new products and expansion in high-growth regions augur well on a long-term perspective. In addition, Honeywell is building a robust pipeline of new products. It is also experiencing significant demand for its connected aircraft offerings from its customers.
In the past six months, this Zacks Rank #3 (Hold) company’s shares have returned 0.4% against the industry’s decline of 7%.
However, Honeywell remains susceptible to material price inflation, which in turn, might hurt its profitability. Also, in order to differentiate its products and prevent commoditization, the company has to continually develop and maintain competitive products by adding innovative features. These, in turn, may lead to high R&D expenditures, often resulting in margin contraction.
Stocks to Consider
Some better-ranked stocks in the same space are Federal Signal Corporation FSS, Raven Industries, Inc. RAVN and United Technologies Corporation UTX. All these companies carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Federal Signal surpassed estimates in the trailing four quarters, with an average positive earnings surprise of 16.1%.
Raven Industries outpaced estimates twice in the preceding four quarters, with an average earnings surprise of 9.8%.
United Technologies outpaced estimates in the preceding four quarters, with an average earnings surprise of 6.8%.
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