Honeywell (NYSE: HON) is scheduled to report its Q1 2024 outcomes on Thursday, April 25. We anticipate the corporate to report income of $9.1 billion and adjusted earnings of $2.19 per share, each barely above the consensus estimates. Whereas Honeywell will profit from elevated aftermarket companies for industrial aerospace, a troublesome comparability for warehouse automation might weigh on its gross sales progress. Not solely can we anticipate Honeywell to submit an upbeat Q1, we expect its inventory has some room for progress from its present ranges of round $195. Our interactive dashboard evaluation of Honeywell’s Earnings Preview has extra particulars on how the corporate’s revenues and earnings will doubtless pattern for the quarter. So, what are among the traits which can be prone to drive Honeywell’s outcomes?
Firstly, allow us to take a look at its inventory efficiency in recent times. HON inventory has seen little change, transferring barely from ranges of $215 in early January 2021 to round $195 now, vs. a rise of about 35% for the S&P 500 over this roughly three-year interval. Total, the efficiency of HON inventory with respect to the index has been fairly risky. Returns for the inventory have been -2% in 2021, 3% in 2022, and -2% in 2023. As compared, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 – indicating that HON underperformed the S&P in 2021 and 2023.
Actually, constantly beating the S&P 500 — in good occasions and dangerous — has been troublesome over current years for particular person shares; for heavyweights within the Industrials sector together with CAT, GE, and UNP, and even for the megacap stars GOOG, TSLA, and MSFT. In distinction, the Trefis High Quality (HQ) Portfolio, with a set of 30 shares, has outperformed the S&P 500 annually over the identical interval. Why is that? As a bunch, HQ Portfolio shares offered higher returns with much less danger versus the benchmark index; much less of a roller-coaster experience, as evident in HQ Portfolio performance metrics.
Given the present unsure macroeconomic setting with excessive oil costs and elevated rates of interest, may HON face an analogous scenario because it did in 2021 and 2023 and underperform the S&P over the subsequent 12 months — or will it see a robust leap? From a valuation perspective, HON inventory seems like it may possibly see increased ranges. We estimate Honeywell’s Valuation to be $226 per share, over 15% above the present market worth of $194. This represents a 23x P/E a number of primarily based on our EPS estimate of $9.97 for Honeywell in 2024. The 23x determine aligns with the inventory’s common P/E a number of over the past three years. Honeywell has guided for its 2024 adjusted earnings to be within the vary of $9.80 and $10.10 per share.
Wanting on the earlier quarter, Honeywell’s income of $9.4 billion in This fall was up 3% y-o-y, led by a 15% rise in Aerospace and a 6% rise in Efficiency Supplies, whereas Constructing Applied sciences gross sales have been down 1% and Security & Productiveness section gross sales fell 24%. Industrial aviation demand drove the Aerospace section gross sales, whereas softness within the warehouse automation market weighed on the Security & Productiveness section. Honeywell noticed its working margin contract 190 bps to 16.8% in This fall’23. Excessive revenues and margin contraction resulted in adjusted earnings of $2.60 per share, versus the $2.52 determine it reported within the prior-year quarter.
Coming to the most recent quarter, we expect an analogous pattern will doubtless be seen, with Aerospace main the gross sales progress on the again of a sturdy aftermarket companies demand. Nonetheless, Security & Productiveness will doubtless be a drag on the top-line progress because of a continued weak point in warehouse automation. We don’t anticipate any significant change in Constructing Applied sciences gross sales. Total, Honeywell’s Q1 will primarily be pushed by its Aerospace enterprise, whereas the expansion in different segments is anticipated to choose up within the coming quarters. Honeywell expects a slight growth in general section margin in 2024, however it could be extra favorable within the second half of the yr.
Whereas HON inventory seems appropriately priced, it’s useful to see how Honeywell’s Friends fare on metrics that matter. You will see different helpful comparisons for firms throughout industries at Peer Comparisons.
| Returns | Apr 2024 MTD [1] |
2024 YTD [1] |
2017-24 Complete [2] |
| HON Return | -5% | -7% | 76% |
| S&P 500 Return | -5% | 5% | 124% |
| Trefis Strengthened Worth Portfolio | -7% | -1% | 606% |
[1] Returns as of 4/23/2024
[2] Cumulative complete returns because the finish of 2016
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The views and opinions expressed herein are the views and opinions of the writer and don’t essentially replicate these of Nasdaq, Inc.
