Shares of Honeywell International Inc. (HON) hit a new 52-week high of $99.21 during yesterday’s trading session, before sliding a notch lower to close at $98.88. This translates to a decent one-year return of 11.7%.
Honeywell’s share prices have been on an uptrend since it reported impressive third-quarter 2014 earnings results in October this year. Despite its strong price appreciation, this Zacks Rank #3 (Hold) stock still has the wherewithal to further drive its price upward. The stock is currently trading at a forward P/E of 17.7x and has long-term earnings growth expectation of 10.3%.
Growth Drivers
A substantial growth in earnings per share accompanied by steadily rising revenues seems to have acted as catalysts for the price upsurge in Honeywell’s stock. Net income was $1,192 million or $1.47 per share in the reported quarter, compared with $1,007 million or $1.24 per share in the year-ago quarter. Earnings per share (at 26.5% tax rate) stood at $1.43 compared with $1.25 in the year-earlier quarter and exceeded the Zacks Consensus Estimate by a couple of cents.
Honeywell benefited from continued operational momentum, driving sales growth and margin expansion. Revenues in third-quarter 2014 increased 5.0% year over year to $10,108 million and beat the Zacks Consensus Estimate of $10,052 million.
The company also announced a 15% year-over-year hike in its quarterly dividend payout to 51.75 cents per share or $2.07 on an annualized basis. The increased dividend will be payable from fourth-quarter 2014, and is scheduled to be paid on Dec 10 to shareholders of record as of Nov 20.
A steady dividend payout is part of the long-term strategy of Honeywell to provide attractive risk-adjusted returns to its stockholders. In addition, healthy dividend increases at periodic intervals have been one of Honeywell’s strong points. The current dividend increase is the 10th such instance for the company since 2005.
Going forward, despite a challenging macroeconomic environment, Honeywell expects to deliver strong earnings momentum in the forthcoming year by continually investing in new products and technologies, and increasing its geographic footprint in high-growth markets. All these measures probably raised investor confidence and drove the shares to a 52-week high.
Other Stocks to Consider
Other players in the industry worth mentioning include Federal Signal Corp. (FSS), Carlisle Companies Inc. (CSL) and Noble Group Limited (NOBGY), each of which carry a Zacks Rank #1 (Strong Buy).
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