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Understanding Honeywell’s Newly Added Risk Factors

Honeywell International (HON) is an American multinational conglomerate. Its products and services are used in various industries, including aerospace and automotive. It also provides building technologies.  

For Q4 2021, Honeywell reported a 3% year-over-year drop in revenue to $8.7 billion from $8.9 billion but still met the consensus estimate. The company cited supply-related constraints and lower mask sales compared to the year-ago period as the causes of the decline in revenue. It posted adjusted EPS of $2.09, which rose from $2.07 in the same quarter the previous year and beat the consensus estimate of $2.08.

Honeywell plans to distribute a quarterly cash dividend of $0.98 per share on March 11. It has set February 24 as the ex-dividend date. 

With this in mind, we used TipRanks to take a look at the newly added risk factors for Honeywell.

Risk Factors

According to the new TipRanks Risk Factors tool, Honeywell’s top risk category is Legal and Regulatory, with 6 of the total 20 risks identified for the stock. Production and Finance and Corporate are the next two major risk categories with 5 and 3 risks, respectively. Honeywell has recently updated its profile with three new risk factors.

In a newly added Finance and Corporate risk factor, Honeywell tells investors that it has set certain environmental, social, and governance (ESG) goals. It explains that customers, investors, and regulators are increasingly focusing on corporate ESG practices. The problem is that Honeywell’s ability to achieve its ESG goals is subject to factors outside its control. Therefore, the company cautions that its business and reputation may be harmed if its ESG practices fall short of expectations. It further warns that it could be subject to regulatory enforcement actions and lawsuits if it fails to satisfy various ESG reporting requirements.

In a newly added Production risk factor, Honeywell cautions that pension-related matters may adversely impact its operating results and cash flow. It explains that if there are significant changes in investment returns on pension assets, it may need to make cash pension contributions to fund pension plans in future periods. Such cash contributions could adversely affect operating results. 

Honeywell informs investors in a newly added Legal and Regulatory risk factor that it is subject to COVID-19 vaccine mandates. As a result, employees who did not get vaccinated or qualified for exemptions were to be terminated before the end of January 2022. The company cautions that its implementation of current or future vaccine mandates may cause it to lose critically skilled personnel and face difficulties hiring in the future, which could significantly harm its business and financial condition.

Analysts’ Take

UBS analyst Markus Mittermaier recently reiterated a Buy rating on Honeywell stock but lowered the price target to $220 from $237. Mittermaier’s reduced price target suggests 20.79% upside potential. The analyst noted that Honeywell issued a subdued outlook for 2022.

Consensus among analysts is a Moderate Buy based on 7 Buys and 8 Holds. The average Honeywell price target of $226.27 implies 24.24% upside potential to current levels.

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