On Friday, RBC Capital Markets adjusted its price target for Honeywell International (NASDAQ:HON), reducing it to $214 from the previous $218, while maintaining a Sector Perform rating on the stock. This change comes as a response to Honeywell’s recent announcement of a downward revision in its 2024 guidance.
The company reported a modest operating beat for the second quarter of 2024 but also revealed a 15 cents per share, or 1.5%, reduction in its guidance for the year. This revision was initially unexpected as the company had reaffirmed its outlook earlier on June 3, 2024.
The lowered guidance is attributed to a combination of factors including a negative margin mix resulting from a stronger performance in longer-cycle projects, weaker than expected short-cycle revenues, and the financial impacts of recent mergers and acquisitions.
These M&A activities have led to increased near-term integration costs and higher interest expenses, contributing 5 cents per share to the guidance cut.
The analysis by RBC Capital highlights that the optimism surrounding Honeywell’s high-margin short-cycle businesses has not yet materialized as many had hoped. Despite these challenges, RBC notes the proactive approach of Honeywell’s new CEO in pursuing growth through mergers and acquisitions.
In other recent news, Honeywell International Inc (NASDAQ:HON) has been actively adjusting its business strategies and facing legal challenges. The company lowered its annual profit outlook due to decreased demand for its industrial automation products.
Despite a decline in sales within this segment, Honeywell's aerospace segment helped increase total sales by 5% to $9.58 billion. The company's adjusted profit for the quarter was $2.49 per share, surpassing the estimated $2.42 per share.
Honeywell also faced a lawsuit filed by Connecticut firefighters, alleging that the company provided protective gear tainted with harmful substances. The lawsuit demands at least $5 million in damages.
Meanwhile, Honeywell's dismissal of an engineer over training was upheld by the 7th U.S. Circuit Court of Appeals, ruling that the company did not breach workplace anti-discrimination laws.
In terms of acquisitions, Honeywell purchased Air Products (NYSE:APD)' LNG unit for $1.81 billion and CAES Systems for $1.9 billion, indicating an aggressive expansion strategy. The company also realigned business units within its Industrial Automation segment and adjusted its financial reporting metrics.
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