Honeywell International Inc.

HON Details

Honeywell International Inc. (NASDAQ: HON) develops and markets solutions to address some of the world's most pressing issues, including energy, safety, security, air travel, productivity, and global urbanization. It is a significant software-industrial company dedicated to bringing state-of-the-art technology solutions to high-growth businesses in broad-based, attractive industrial end industries to improve efficiency, productivity, sustainability, and safety.

Latest Updates:

• New Partnerships: HON announced a commercial agreement with AstraZeneca, a global leader in the treatment of respiratory disorders, on February 22, 2022, to develop and bring to market next-generation respiratory inhalers for the treatment of asthma and chronic obstructive pulmonary disease (COPD).
• Strategic Collaboration: HON and TotalEnergies established a strategic partnership on February 17, 2022, to encourage the development of sophisticated plastic recycling. HON will use its UpCycle Process Technology to supply TotalEnergies with recycled polymer feedstock (RPF) under the terms of this agreement. TotalEnergies will purchase this raw material and turn it into virgin-quality polymers that may be utilized in food-grade packaging and other high-stress applications.

FY21 Results:

Sources: Company Website

• Surge in Topline: The company reported a 66% increase in revenues to USD 25.64 billion in FY21 (ended December 31, 2021) from USD 24.74 billion in FY20.
• Rise in Bottom Line: The company generated a net income of USD 5.61 billion in FY21, compared to USD 4.87 billion in FY20.
• Healthy Balance Sheet: As of December 31, 2021, the company had cash and cash equivalents (including short-term investments) of USD 11.52 billion and outstanding debt of USD 19.60 billion.

Key Risks:

• Competition Risk: HON's capacity to develop new technologies and deliver new products that gain market acceptance in increasingly competitive areas while maintaining acceptable margins is critical to its future success.
• Other Macro Risks: The company's sales and activities are concentrated in non-US jurisdictions, exposing to the economic, political, regulatory, foreign exchange, and other risks associated with overseas operations.

Outlook:

FY22 Guidance (FY21 Press Release, February 03, 2022)

Valuation Methodology: Price/ Earnings Per Share Multiple Based Relative Valuation

Source: Analysis by Kalkine Group

Stock Recommendation:

HON had increased its sales guidance for FY22 and had a strong balance sheet. Besides, the company's strategy includes investing in high-return capital expenditures, repurchasing USD 3.4 billion in Honeywell stock, and completing four acquisitions. The RSI level for the stock is ~25.17, indicating an oversold zone. After using the Price/Earnings-based valuation, we arrived at a target price of USD 216.06 for the company.

Considering the FY22 guidance, strong financials, new acquisitions, current valuation, and associated risks, we recommend a "Buy" rating on the stock at the current price of USD 177.00, as of February 24, 2022, at 1:11 PM ET.

HON's 1-Year Technical Price Chart. (Source: REFINITIV, Analysis by Kalkine Group)

Technical Summary Analysis:

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors' appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above.