Shares of Honeywell International Inc. HON saw the biggest single-day jump in over four years, buoyed by the industrial heavyweight’s upbeat guidance for 2016. Shares climbed an impressive 5.7% to close at $104.08 in yesterday’s trading session.
Honeywell reiterated its 2015 expectations and projected growth in both profit and sales in the coming year, despite a slow global economy. The optimistic news came a day after another large diversified manufacturer, 3M Company MMM, trimmed its profit outlook, citing sustained sluggish global growth. (Read more: 3M Shares Down 6% Owing to Lowered 2015 Guidance)
Despite uncertainty in some end markets, Honeywell expects its revenues to jump back on the growth track in 2016, after expected declines this year. The company anticipates that revenues for 2016 will lie in a range of $39.9 billion and $40.9 billion, reflecting year-over-year growth of 4%-6%. 2016 earnings are forecasted to lie in the range of $6.45 per share and $6.70 per share, reflecting growth of 6%-10%.
For 2015, the company expects $6.10 per share in earnings, on revenues of $38.5 billion, which represent a sales decline of 4.5% compared to last year. The earnings guidance is in line with the current Zacks Consensus Estimate for 2015.
Honeywell expects core organic growth of 1%-2%, with segment margin expansion of 80 to 110 basis points in 2016.
The company has closed down factories, cut jobs and invested in new products such as refrigerants to boost its bottom line, while battling a slowdown within the oil and gas industry and lacklustre economic growth.
Honeywell is optimistic about growth in its fluorine products and transportation systems. Also, contributions from recent acquisitions are expected to lend strength to the top line. These include the $5.1 billion acquisition of meter manufacturer Elster announced in July, and the recent $119.5 million purchase of Sigma-Aldrich's research chemical business.
Honeywell has made 84 successful acquisitions in the last 13 years, boosting its annual sales by about $12 billion and creating an impressive portfolio that includes 65 brands.
Honeywell was one of the few American industrial companies, which increased the earnings forecast earlier this year. Most companies have trimmed earnings expectations amid headwinds like crude price slump, a strong dollar and weak growth in emerging markets economies such as Brazil.
Honeywell presently has a Zacks Rank #3 (Hold). A couple of better-ranked stocks that are worth a look now include Federal Signal Corp. FSS and Macquarie Infrastructure Corporation MIC, both sporting a Zacks Rank #2 (Buy).
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