On Tuesday, RBC Capital Markets adjusted its price target for Honeywell International (NASDAQ:HON), reducing it to $218 from $222, while retaining a Sector Perform rating on the stock.
The adjustment follows Honeywell's announcement of the completion of its $4.95 billion acquisition of the Carrier security business. Alongside this news, Honeywell has updated its guidance to include the Carrier business in its second-quarter and full-year 2024 forecasts and has also announced a shift to cash earnings per share (EPS) reporting.
The acquisition of Carrier's security business is expected to be neutral to Honeywell's cash EPS in 2024. This strategic move is anticipated to have no immediate impact on the stock, as the underlying guidance metrics provided in the previous quarter remain unchanged. The only notable modifications to the guidance are the inclusion of the Carrier business and the additional financing expenses incurred from the acquisition.
RBC Capital has expressed support for Honeywell's transition to cash EPS, stating that it aligns the company's reporting with that of its industry peers. Honeywell is set to provide restated financials that reflect this new reporting method with its second-quarter 2024 earnings.
The completion of this acquisition marks a significant expansion for Honeywell, integrating the Carrier security business into its operations. The company's guidance update and reporting change are indicative of its efforts to provide clarity to investors and align with common industry practices. Honeywell is expected to release its detailed financial results for the second quarter of 2024, which will include the impact of the Carrier acquisition.
In other recent news, Honeywell International Inc (NASDAQ:HON). exceeded first-quarter earnings expectations, primarily due to the robust performance of its aviation segment. The company reported an 18% increase in sales within its aerospace division, reaching $3.67 billion. However, Honeywell experienced a slowdown in its industrial and building automation units. Despite this, the company's overall first-quarter sales grew by 3% to $9.11 billion, surpassing analyst estimates of $9.03 billion.
In other developments, Deutsche Bank downgraded the stock of Honeywell from Buy to Hold, due to the company's continuous underperformance compared to its industry peers. The downgrading decision was influenced by the company's sub-par organic growth.
Honeywell is reportedly exploring the sale of its personal protective equipment (PPE) division, which could be valued at over $2 billion. This move comes as part of a broader strategy to realign its business around automation, aviation, and energy transition.
InvestingPro Insights
In light of Honeywell's recent acquisition and guidance update, a glance at the latest metrics from InvestingPro provides additional context for investors. Honeywell's market capitalization stands at a robust $131.84 billion, reflecting the scale of its operations post-acquisition. The company's P/E ratio, as of the last twelve months leading up to Q1 2024, is 22.94, which is on the higher side and signals that investors may expect strong earnings growth going forward. Additionally, Honeywell's dividend yield is currently 2.13%, which is appealing for income-focused investors, especially considering that Honeywell has raised its dividend for 13 consecutive years, a testament to its financial stability and commitment to shareholder returns.
InvestingPro Tips suggest Honeywell is a prominent player in the Industrial Conglomerates industry, operating with a moderate level of debt and having liquid assets that exceed short-term obligations. These factors, combined with the company's consistent profitability and low price volatility, may offer reassurance to investors amid the recent acquisition-related expenses. For those seeking deeper analysis, InvestingPro offers a range of additional tips for Honeywell, which can be accessed by visiting https://www.investing.com/pro/HON. To enhance your investing strategy, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. In total, there are 10 more InvestingPro Tips available that could provide valuable insights into Honeywell's performance and outlook.
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