Honeywell Up to Hold on Novel Products & Technologies
On Oct 11, Zacks Investment Research upgraded diversified conglomerate Honeywell International Inc. (HON) to a Zacks Rank #3 (Hold) from a Zacks Rank #4 (Sell) largely on the back of healthy long-term fundamentals fuelled by sustained technology and product innovations. The stock is currently trading at a forward P/E of 15.9x and has long-term earnings growth expectation of 10.3%.
Why the Upgrade?
Honeywell recently introduced a complete suite of software and services titled Digital Suites, primarily tailored for the Oil and Gas sector, in order to increase production and improve operational safety. These include six subsets of services including operational data, process safety, production surveillance, equipment effectiveness, production excellence and operational performance.
The Digital Suites technology will help producers overcome data challenges by capturing, managing, and analyzing the right production data. These novel software and services are likely to help upstream companies improve production by 3%–5% through a combination of better productivity, higher uptime, and remote operations. It will further improve operational safety with healthy return on investment in less than six months.
Honeywell further intends to increase production of its low-GWP (global-warming-potential) refrigerants, insulation materials, aerosols and solvents to reduce high-GWP hydro-fluorocarbons (HFCs) by almost half over a five-year period. Leveraging its technological expertise, Honeywell has developed a range of diverse products with GWP, which are safe and capable of making a significant positive environmental impact. To date, the company has already invested approximately $350 million and expects to spend approximately $550 million more along with its suppliers to support the new products. The company expects that the use of its low-GWP Solstice HFC replacements will eliminate over 350 million metric tons in CO2 equivalents by 2025.
At the same time, Honeywell plans to delist the common stock from the Chicago Stock Exchange to avoid dual listings. The purported move is aimed to streamline operations and eliminate unnecessary duplicative administrative procedures and costs involved. However, the Chicago Stock Exchange will continue to trade Honeywell shares on an unlisted trading privilege basis, thereby not affecting the liquidity of the stock.
Moving forward, Honeywell aims to continue investing in new products and technologies, and increase its footprint in high-growth markets. The restructuring and cost streamlining initiatives should also translate into sustained margin expansion in the forthcoming quarters.
Other Stocks to Consider
Some other stocks in the industry that also look promising include CLARCOR Inc. (CLC), Compass Diversified Holdings (CODI) and Mitsubishi Corporation (MSBHY), each carrying a Zacks Rank #2 (Buy).
Read the Full Research Report on HON
Read the Full Research Report on CLC
Read the Full Research Report on MSBHY
Read the Full Research Report on CODI
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