Where Will Honeywell Stock Be In 1 Year?

Honeywell (NASDAQ:HON) is down 5% year-to-date, vastly underperforming the market, and the question is whether that bearish momentum will continue or a turnaround is on the horizon. 

Honeywell is truly an industrial giant serving aerospace, industrial automation, energy and sustainability industries, but that berth hasn’t been sufficient to offset the bearish flows from the market.

So, what can support HON share price over the coming year and how high can it go?

What Is Driving Honeywell’s Growth?

Not all growth at Honeywell has been driven by organic catalysts. Management has a clear policy to target other companies that complement existing offerings.

It has been highly acquisitive in recent years and the new purchases have largely proven to be successful. The company bought many advanced bolt-ons and tuck-in assets that improve its technology capabilities and fit well with important global trends. Generally, as part of its M&A transactions, it targets companies that sit between $1 billion and $7 billion.

A good example is the recent purchase of Carrier’s Global Access Solutions business for almost $5 billion. This deal has the potential to make Honeywell a leading company in new-age security solutions and improve the firm’s high-profit product range in Building Automation.

Another important purchase is Compressor Controls Corporation (CCC), a leading company for turbomachinery control and optimization solutions. CCC’s technology has the potential to complement Honeywell’s efforts in sustainability and digitalization by adding new carbon capture control solutions to its offerings.

Management has also expressed interest to buy Civitanavi Systems for about €200 million ($217.98 million) with the aim of improving navigation solutions in areas like aerospace, defense, and industrial platforms.

Honeywell Is Riding In Vogue Trends

Honeywell has also kept its pulse on trending technologies as exemplified by its purchase of SCADAfence, which provides cybersecurity solutions to monitor large networks as well as advanced technologies for finding lost assets, threat detection, and managing security rules.

These bolt on to Honeywell’s existing cybersecurity offerings, creating a stronger foundation for Honeywell to expand in a market famous for fast growth.

Management has also taken a tack to invest in aerospace by growing its Olathe plant in Kansas, a project that cost more than $80 million. 

Honeywell’s Earnings Better Than Expected

Management shared results for the first quarter, which were better than expected. In the first fiscal quarter of 2024, which ended on March 31, 2024, Honeywell’s net sales grew by 2.7% compared to the same time last year, reaching $9.11 billion. Income before taxes also increased by 5%, reaching $1.87 billion.

Net income and earnings per share increased by 4.8% and 7.7% from last year to $1.48 billion and $2.23, respectively.

By the end of Q1, Honeywell’s cash and cash equivalents totaled $11.76 billion, a leap up from the $7.93 billion at the end of last year.

Current assets totaled $27.43 billion, significantly higher than the $23.50 billion on the books as of December 31, 2023.

Also, cash inflow from operating activities was $448 million for the quarter, while it had a cash outflow of $784 million in the same period last year, another notable positive.

What Does Guidance Look Like?

Following an impressive Q1, management kept full-year sales, segment margin, adjusted earnings per share, and cash flow guidance the same.

Full-year sales are expected to be $38.1 billion to $38.9 billion, with organic sales growth between 4% and 6%.

Segment margin is expected to be between 23.0% and 23.3%, with an increase in segment margin by 30 to 60 basis points.

Meanwhile, adjusted earnings per share is forecast to land between $9.80 and $10.10, which is an improvement of about 7% to 10%.

Operating cash flow is expected to be from $6.7 billion up to $7.1 billion, and free cash flow forecast to range between $5.6 billion and $6.0 billion.

Where Will Honeywell Stock Be In 1 Year?

Honeywell stock has the potential to rise to $228 per share, a rise of 13.1% over the next year according to the consensus of 13 analysts.

Interestingly, a dividend multi-stage model would place fair value considerably higher at $269 per share. And that’s not entirely a surprise when you consider the company pays out $4.32 per share, corresponding to a 2.18% dividend yield.

Factors in favor of the dividend continuing its 13 year growth streak include the payout ratio at just under 50%.

It’s not all rosy, though, with 10 analysts revising their estimates for the share price lower and the price-to-earnings ratio looking elevated relative to near-term earnings growth.

The P/E ratio now sits at 22.3x while net income growth is forecast at 9.2% annually over the next 5 years. That growth is nothing to sneeze at but it’s not going to light up investors especially either.

One under-appreciated facet of owning Honeywell is that it tends to have quite low stock volatility. As an industrial conglomerate with fairly predictable revenues and earnings, few surprises are expected to derail investors’ and analysts’ investment thesis. As a result, for income-oriented investors in particular who are looking for a steady ship to navigate choppy waters up ahead, Honeywell checks a lot of boxes.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.