On Tuesday, Citi increased its price target for Honeywell International (NASDAQ:HON) shares to $244 from $243, maintaining a Buy rating on the stock. This adjustment follows Honeywell's announcement that it has completed the acquisition of CARR's Global Access Solutions business sooner than expected.
The acquisition is seen as a reflection of Honeywell's more assertive stance on capital deployment, which is anticipated to enhance the company's profitability and value creation over time. Although Honeywell has indicated some short-term earnings impact due to integration and deal costs, the company expects the acquisition to be adjusted earnings per share (EPS) accretive in the first full year of ownership.
CARR's Global Access Solutions business is expected to contribute significantly to Honeywell's earnings in 2025 and beyond, with an estimated $0.10 to $0.15 addition to EPS in 2025. The business is characterized by its higher growth and margin profile, which includes mid-single to high-single digit growth and an approximate 40% EBITDA margin.
As Honeywell works on integrating the new acquisition, there is potential for additional revenue and cost synergies. The company may enhance its offerings through cross-selling and bundling of products and solutions. Furthermore, Honeywell could optimize the manufacturing and supply chain footprint of the newly acquired asset as part of its integration strategy.
The company's first-quarter earnings exceeded expectations, primarily driven by an 18% increase in sales within its aerospace division, reaching $3.67 billion. Overall, Honeywell's first-quarter sales grew by 3% to $9.11 billion, surpassing analyst estimates of $9.03 billion.
In terms of acquisitions, Honeywell recently completed its $4.95 billion acquisition of the Carrier security business. This significant expansion has led the company to update its second-quarter and full-year 2024 forecasts to include the Carrier business. Additionally, Honeywell has transitioned to cash earnings per share (EPS) reporting, a move supported by RBC Capital.
However, Deutsche Bank (ETR:DBKGn) has downgraded Honeywell's stock from Buy to Hold due to the company's continuous underperformance compared to its industry peers. This decision was influenced by Honeywell's sub-par organic growth. Furthermore, Honeywell is reportedly exploring the sale of its personal protective equipment (PPE) division, valued at over $2 billion, as part of a broader strategy to realign its business around automation, aviation, and energy transition.
Lastly, Honeywell has confirmed compliance with export license requirements and sanctions laws, stating that it has not supplied any equipment, parts, products, or services to the refinery at Nizhny Novgorod since February 2022. These recent developments reflect Honeywell's ongoing efforts to adapt and grow in a dynamic business environment.
InvestingPro Insights
Following Citi's updated price target for Honeywell International, an InvestingPro analysis provides further insights into the company's financial health and market performance. Honeywell has demonstrated a commitment to shareholder returns, having raised its dividend for 13 consecutive years, and maintained dividend payments for 40 consecutive years, signaling a strong track record of financial discipline and reward for investors. Moreover, with a market capitalization of $133.29 billion and a P/E ratio of 23.2, Honeywell is trading at a high valuation relative to near-term earnings growth.
InvestingPro Tips indicate that Honeywell operates with a moderate level of debt and its liquid assets exceed short-term obligations, which provides financial flexibility and stability. Moreover, with analysts predicting profitability for the year and a 2.13% dividend yield, Honeywell appears to be an attractive option for investors seeking a blend of growth and income.
For those interested in a deeper dive into Honeywell's financials and market position, there are additional InvestingPro Tips available, which can be accessed with the use of coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
InvestingPro Data shows Honeywell's revenue for the last twelve months as of Q1 2024 is $36.9 billion, with a growth rate of 2.64%. The company's gross profit margin stands at a healthy 37.46%, emphasizing its ability to maintain profitability amidst its expansion efforts. These metrics underscore Honeywell's solid financial performance and support the optimistic outlook presented by Citi's recent price target revision.
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