Honeywell Talks About Growth Potential, Long-Term Targets at Investor Conference

Honeywell International Inc. (NASDAQ: HON) highlighted its growth potential and updated long-term projections at its 2022 Investor Conference. The event was held at the company’s headquarter in Charlotte, NC, and presided over by its top officials.

Shares of Honeywell inched up 0.6% to close at $187.52 on Thursday.

Honeywell is a diversified industrial and technology company. Its technologies are focused to deal with challenges related to air travel, energy, global urbanization, productivity, and security.

Growth Opportunities & Long-Term Targets

Honeywell communicated that its focus on innovation, transformation efforts, and a solid operating system is building on its competitive advantage. Also, it is poised to gain from favorable tailwinds in the markets served, growing recurring revenues, and planned capital investments.

The company anticipates cumulative benefits of $2 billion from its activities focused on supply chain transformation and digitization in the next three years. It also expects sales from new products introduced to account for 33% of its total revenues by 2023 versus 31% in 2021. The addressable market of Breakthrough initiatives (BTI) — which generated over $2 billion in revenues in the past three years — is expected to be more than $200 billion.

It is also working toward reducing the impact of its facilities and operations on the environment and being carbon neutral by 2035.

In the long term, Honeywell anticipates organic sales growth to be within 4%-7% range, higher compared with the earlier range of 3%-5%. The segmental margin is expected to expand 40-60 basis points (bps) annually, compared with 30-50 bps expected previously. The free cash flow margin is expected to be in the mid-teens. Over the coming three years, the capital deployment target is set at $25 billion.

Projections for 2022

Honeywell has reiterated its 2022 projections, which it provided last month.

Adjusted earnings per share are anticipated to be within the $8.40-$8.70 per share range, reflecting year-over-year growth of 4%-8%. Revenues are expected to vary within the $35.4-$36.4 billion range. Organic sales are likely to grow 4%-7% year-over-year. The segment margin is expected to grow 10-50 bps to 21.1%-21.5%.

Cash flow from operating activities is predicted to be $5.7-$6.1 billion in 2022, with capital expenditure of 1.2 billion. The free cash flow is expected to be $4.7-$5.1 billion. The company plans to buy back at least $4 billion worth of shares in the year.

In the first quarter, adjusted earnings per share are anticipated to be within the $1.80-$1.90 range. Revenues are expected to be $8.1-$8.4 billion. Organic sales growth (year-over-year) is expected to be within (2%)-1% range.

Management’s Comments

Honeywell’s Chairman and CEO, Darius Adamczyk, said, “While 2021 was another difficult year as we navigated through the prolonged pandemic and significant supply chain challenges, our relentless focus on operational execution, value creation framework, and investments in disruptive technologies have positioned us well to address the world’s increasing demand for digital transformation, process technology, and sustainable solutions.”

He added, “Today, we turn our focus to the next phase of Honeywell’s growth, including driving innovation that builds on our long-standing expertise in controls, automation, and software, and successful breakthrough initiatives, such as Quantinuum and Sustainable Technology Solutions, which have now graduated into freestanding, high-growth businesses.”

Stock Rating

Recently, an RBC Capital analyst, Deane Dray, maintained a Hold rating on Honeywell with a price target of $214 (14.12% upside potential).

Meanwhile, Markus Mittermaier, an analyst at UBS, reiterated a Buy rating on Honeywell while lowering the price target to $220 (17.32% upside potential) from $237. The analyst’s reaction came in after Honeywell reported weaker-than-expected earnings in the fourth quarter and provided lackluster projections for 2022.

The stock has a Moderate Buy consensus rating based on 7 Buys and 8 Holds. The average Honeywell price target of $226.27 suggests 20.66% upside potential from current levels. Over the past year, shares of Honeywell have lost 5.9%.

Bloggers Opinion

Per TipRanks data, the financial blogger opinions are 80% Bullish on HON, compared to the sector’s average of 68%.

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