Honeywell: Short- And Long-Term Catalysts

Safety and security is certainly prevalent in the current uncertain world that we face today.  With terrorism and mass shootings in the headlines, there is a strong need for increased safety and security systems. Honeywell (HON) is a company that provides valued solutions for the safety and security of consumers and businesses.    

Honeywell has short- and long-term catalysts that are likely to drive the stock to outperform the S&P 500. The company has a good track record of making strategic acquisitions to grow the business over the long-term. The recent positive earnings report and increased earnings guidance is likely to catalyze the stock for the short-term.

Honeywell’s stock is likely to move higher in the short-term before its next earnings report in June. The reason for that is a result of the company’s increased earnings guidance for FY16. Previous estimates for EPS of $6.45 to $6.70 were increased to the top of the range to $6.55 to $6.70.This shows that management is confident that the company will achieve earnings in the upper range. Investors are likely to get bullish when earnings guidance is increased as they anticipate strong future results for the fiscal year.

The short-term earnings increases are being driven by restructuring and cost management, thus leading to margin expansion. The 1% to 2% organic sales growth that the company is expecting will add to the total revenue gains being derived from acquisitions. 

Honeywell’s acquisitions help the company to grow revenue. The acquisition strategy allows the company to add on new technology to strengthen the business and drive new growth. The recent acquisition of Xtralis adds growth to Honeywell’s Security and Fire Business. Xtralis will allow Honeywell to meet the needs of customers as they seek early and reliable smoke detection.  Xtralis’ technology detects smoke in the very early stages of a fire.The early detection can help emergency responders to save lives and prevent building damage. 

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Disclaimer:This article represents the author's opinions.  Investors should do their own due diligence and consult with an investment advisor to determine which stocks are right for ...

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