Honeywell International Inc. (HON) continues to ride high on the wings of its commercial aviation aftermarket and original equipment businesses. This surge has been fueled by robust demand in the air transport and business aviation markets. Additionally, a solid defense and space business has proven to be beneficial, thanks to stable U.S. and international defense spending.
Strong Performance across Segments
The company’s Building Technologies segment is poised for growth, owing to solid demand for building solutions and high backlog levels. Furthermore, the Performance Materials and Technologies segment is bolstered by the strength in advanced materials, process solutions, HPS and UOP businesses.
In line with this growth trajectory, Honeywell has been proactive in acquisitions to fortify its business. In December 2023, the acquisition of Carrier’s Global Access Solutions business for $4.95 billion was a strategic move. This notable acquisition not only positioned the company as a leading provider of security solutions for the digital age but also showcased its commitment to expansion and innovation.
Furthermore, the company’s shareholder-friendly approach, with consistent dividend payouts and share repurchases, has reinforced investor confidence. In 2023, Honeywell paid dividends of $2.86 billion and repurchased shares worth $3.72 billion. The upward hike of 5% in its quarterly dividend rate in September 2023 has contributed positively to the investment outlook for the company.
Steady Revenues and Acquisitions
The company’s revenues are anticipated to be within the range of $38.1-$38.9 billion for 2024, with organic revenues expected to grow by 4-6% year over year. The consistent upward trajectory stands as a testament to the company’s robust business strategies and resilient financial performance.
Honeywell’s acquisition of Compressor Controls Corporation in June 2023, further solidified its expertise in industrial control, automation, and process solutions. As a result, this strategic move positively impacted the Performance Materials and Technologies segment’s sales growth in the fourth quarter of 2023.
Market Challenges
Despite its strong performance, the company has had to navigate through the challenges posed by a low demand environment across its warehouse and workflow solutions. Additionally, softness in the warehouse automation market has impacted the Safety and Productivity Solutions segment’s performance. Furthermore, headwinds across sensing and safety technologies businesses remain a cause of concern.
The company has also grappled with escalating costs and operating expenses, with its total cost of sales rising by 2.9% year over year in 2023. The inflationary impacts across wages and other line items have added further pressure. It is imperative for Honeywell to devise effective strategies to mitigate these challenges and ensure sustained growth.
Stocks to Consider
For investors seeking alternatives, Griffon Corporation (GFF), Flowserve Corporation (FLS), and Tetra Tech Inc. (TTEK) are better-ranked companies that present viable opportunities in the market. Each of these companies holds significant promise and has been making positive strides in their respective sectors.
It’s worth considering Honeywell’s journey in the aerospace business as akin to a flight through turbulent weather. Despite challenges, the company has steered its course admirably, capitalizing on its core strengths and envisioning innovative strategies for future growth.
