Honeywell: Short- And Long-Term Catalysts

Honeywell’s dividend yield of 2% can be maintained even as the stock price increases since the company can afford to raise the dividend payments. However, Honeywell tends to put large sums towards share repurchases.The company recently announced a $5 billion stock repurchase plan

The good thing about the repurchase plan is that it is likely to help increase EPS, which helps drive the stock higher. As shares are bought, the existing shares have less dilution, which puts upward pressure on the stock.One drawback to this is less money is used to pay a dividend.Therefore, the dividend increases may not be as generous as they could be. 

Consensus estimates show that Honeywell is expected to grow total revenue at 5% this year and 3.7% next year. The revenue growth and Honeywell’s gross margin of about 31% will help support its expected earnings growth of 9% for this year and 8.7% for next year. Honeywell’s expected earnings growth is higher than the S&P 500’s average expected growth of between 6% and 7% for the next two years.Therefore, I think the stock will outperform the S&P 500 over the next two years.

If the company meets/exceeds its estimates for most of its quarters, I think that stock can rise approximately in-line with earnings growth.Therefore, I expect the stock to experience to gain 9% in one year and about 18% in two years.  


Honeywell is likely to be a solid dividend investment going forward. I expect near-term positive momentum for the stock over the next few months as a result of the increased earnings guidance.  I also think that the stock will perform well over the long-term as the company continues to attract revenue dollars from customers that aim to make their businesses safer while keeping costs under control through value-added innovations and acquisitions.Therefore, Honeywell investors are likely to make money with the stock edging higher than the S&P 500 over the next two years. At the same time, Honeywell will help make the world a safer place with its focus on safety/security solutions.

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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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