On Friday, Morgan Stanley initiated protection on Honeywell Worldwide (NASDAQ:HON) with an Equalweight score and a value goal of $210. The agency expressed warning concerning the corporate’s near-term restoration prospects and development within the coming years.
Based on the analyst, Honeywell is experiencing lower-than-desired natural development and faces dangers of adverse revisions resulting from its under-exposure to key industrial mega-trends.
The analyst identified that consensus expectations for Honeywell’s short-cycle enterprise strains to recuperate sharply within the second half of 2024 to 2025 is likely to be overly optimistic. Morgan Stanley’s outlook means that Honeywell may proceed to see mid-single-digit declines within the first half of 2024, contrasting with the consensus mannequin of mid-single-digit-plus development.
The agency’s cautious stance is predicated on indicators that suggest potential prolonged headwinds resulting from Honeywell’s vital publicity to sure sectors like US Warehouse, US Retail, and World non-residential, the place main indicators are nonetheless adverse.
By way of Honeywell’s longer-cycle publicity, reminiscent of Aerospace Expertise and Constructing Options, Morgan Stanley predicts challenges in sustaining double-digit development. This is because of more durable comparisons and potential channel destocking, with Aerospace and Protection channel inventories showing elevated amid ongoing provide chain considerations, a difficulty that stands out towards broader US industrial traits.
Morgan Stanley’s evaluation means that Honeywell might wrestle to attain its focused natural development of 4-7% and even fall in need of the consensus forecasts of 5-6% development. As an alternative, the agency fashions a extra conservative 3-4% natural development for Honeywell in 2025-26. This evaluation displays a view that Honeywell’s valuation might not return to historic ranges because of the outlined development challenges and market traits.
In different current information, Honeywell Worldwide Inc (NASDAQ:). has introduced a CFO transition plan with Michael Stepniak set to exchange Greg Lewis, following the discharge of the corporate’s fourth-quarter and full-year monetary outcomes for 2024. Stepniak will transition into his new position as Senior Vice President and CFO at a date permitted by the corporate’s Board of Administrators, whereas Lewis will tackle new tasks as Senior Vice President, Honeywell Accelerator.
Honeywell has additionally reported sturdy Q2 2024 monetary outcomes, surpassing its adjusted earnings per share steerage and hitting the higher vary of its natural gross sales steerage. The corporate’s aerospace sector, together with business aerospace, protection and house, and Constructing Options companies, drove this development.
As well as, Honeywell has accomplished the acquisition of CAES Programs Holdings LLC in a $1.9 billion all-cash transaction, marking a major growth of its protection and house portfolio. The corporate has additionally issued $3.5 billion in senior notes to handle its capital construction and fund varied enterprise operations.
RBC Capital Markets has maintained a Sector Carry out score on Honeywell’s inventory, adjusting its value goal in response to the corporate’s current downward revision in its 2024 steerage.
InvestingPro Insights
As Morgan Stanley casts a cautious eye on Honeywell Worldwide’s development prospects, real-time knowledge from InvestingPro gives further context for traders. Regardless of the considerations raised, Honeywell has demonstrated monetary resilience. The corporate’s market capitalization stands at a strong $131.87 billion, and it has maintained a gentle dividend, rising it for 13 consecutive years. This dedication to shareholder returns is mirrored in a present dividend yield of two.13%, with a current development of 4.85% in dividends, as of the final twelve months main as much as Q2 2024.
Moreover, Honeywell’s price-to-earnings (P/E) ratio is 22.95, with a slight adjustment to 22.64 for the final twelve months as much as Q2 2024. Whereas this means a excessive valuation relative to near-term earnings development, it is price noting that analysts predict the corporate will stay worthwhile this yr. Honeywell’s inventory is thought for low value volatility, which could enchantment to traders searching for stability of their portfolio. An InvestingPro Tip means that Honeywell is a distinguished participant within the Industrial Conglomerates business, which can supply a level of resilience amidst market fluctuations. For traders all in favour of additional evaluation and suggestions, InvestingPro provides further insights on Honeywell at https://www.investing.com/professional/HON, with a complete of 9 extra InvestingPro Ideas obtainable.
Traders must also contemplate Honeywell’s average degree of debt and its excessive income valuation a number of, which can affect the corporate’s potential to navigate via the unsure financial panorama highlighted by Morgan Stanley. With these metrics in thoughts, stakeholders can higher assess Honeywell’s monetary well being and future prospects in keeping with Morgan Stanley’s evaluation.
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