Here's Why Honeywell (HON) Shares Gain Nearly 12% in 6 Months

·3 min read

Shares of Honeywell International HON have gained nearly 12% in the past six months, outperforming the industry’s 5.3% increase in the period.


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Catalysts Behind the Price Surge

Honeywell is benefiting from strong growth in commercial aviation, building products, productivity solutions and services, advanced sensing technologies, advanced materials and recurring connected software businesses. Healthy demand, higher orders and backlog levels bode well for the company’s growth. Orders were up 12% year over year in the second quarter, while the closing backlog was $29.5 billion, also up 12% year over year. Pricing actions and cost control measures are driving the company’s bottom line. The company expects third-quarter sales to increase 7-11% on an organic basis. Adjusted earnings per share are estimated to be $2.10-$2.20 in the third quarter, reflecting an increase of 4-9% year over year.

Strong segmental performances are also expected to have boosted shares of HON. Recovery in commercial flight hours is aiding the company’s Aerospace segment. Honeywell anticipates Aerospace sales to increase mid-single year over year in 2022. Commercial actions and strength in building products and building solutions are supporting growth of the Building Technologies segment. Orders and backlogs remain strong in the segment. The company expects improved volumes and pricing actions to drive growth of the segment in the second half of 2022. It expects double-digit organic growth for the segment in 2022. Strength in process solutions business and advanced materials business bodes well for the Performance Materials and Technologies segment. The company expects sales for the segment to increase in high single digits for the current year. Honeywell expects adjusted earnings per share to increase 6-9% year over year in the current year. It anticipates organic growth of 5-7% for the current year.

Honeywell’s consistent measures to reward its shareholders through dividends and share buybacks also drove the stock higher. In the first half of 2022, HON rewarded its shareholders with $2.4 billion through share repurchases and $1.4 billion through dividend payments. For 2022, the company expects to buy back shares worth $4 billion. Strong free cash flow generation supports the company’s shareholder-friendly measures. For 2022, the company expects free cash flow of $4.70-$5.10 billion.

Honeywell’s efforts to expand operations through acquisitions are also driving the stock higher. In January, the company acquired Tempe, AZ-based U.S. Digital Designs, enhancing its product offerings for improving public safety communications. The acquisition is contributing to top-line growth.

With the gradual easing of supply chain disruptions and continued strength in manufacturing activities, Honeywell’s operations should continue to benefit. This is expected to drive the stock higher.

Zacks Rank & Key Picks

Honeywell carries a Zacks Rank #3 (Hold).

Some better-ranked stocks that you may want to consider are as follows:

Lindsay Corporation LNN sports a Zacks Rank #1 (Strong Buy). LNN pulled a trailing four-quarter earnings surprise of 25.6%, on average. You can see the complete list of today’s Zacks #1 Rank stocks.

Lindsay Corporation has an estimated earnings growth rate of 44.1% for the current year. Shares of the company have rallied 24.8% in the past six months.

Greif, Inc. GEF presently carries a Zacks Rank #2 (Buy). GEF delivered a trailing four-quarter earnings surprise of 22.9%, on average.

Greif has an estimated earnings growth rate of 36.8% for the current year. Shares of the company have gained 20.2% in the past six months.

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