Honeywell recently reported its Q2 results, exceeding revenue and earnings estimates. The company reported revenue of $9.6 billion and adjusted earnings of $2.49 per share, benefiting from a pickup in commercial aviation demand. However, Honeywell lowered its full-year 2024 outlook due to the impact of acquisitions, leading to a 5% decline in its stock price. Despite this, analysts believe there is room for growth in HON stock.
HON stock performance has been volatile, with little change from early 2021 to the current level of around $205. Compared to the S&P 500, HON underperformed in 2021 and 2023, with returns of -2% and -2% respectively. In contrast, the Trefis High Quality Portfolio, consisting of 30 stocks, outperformed the S&P 500 each year over the same period, providing better returns with less risk.
From a valuation perspective, analysts estimate Honeywell’s stock offers room for growth, with a projected valuation of $236 per share, reflecting over 15% above the current market price. Honeywell’s revenue in Q2 was up 5% year-over-year, led by Aerospace Technologies. However, Industrial Automation sales were down 8% due to softness in the warehouse automation market. Honeywell’s segment profit margin of 23% aligned with the prior year, with adjusted earnings per share up 8% year-over-year.
Looking ahead, Honeywell expects its full-year 2024 sales to be in the range of $39.1 billion to $39.7 billion, with a lower segment margin and adjusted earnings per share outlook. Despite the slight let down in earnings outlook, analysts believe investors can use the current dip as an opportunity to pick up HON stock for robust gains in the long term. HON stock is trading at a little under 20x forward expected earnings, compared to the 23x average over the last three years.
While Honeywell appears to have room for growth, it is important to consider how the company’s peers fare on important metrics. Investors can find valuable comparisons for companies across industries through peer comparisons. Overall, Honeywell’s upbeat Q2 performance, particularly in its aerospace business, suggests potential for long-term gains for investors willing to weather short-term fluctuations in the stock price.
