On Tuesday, RBC Capital Markets set its price target on Honeywell International (NASDAQ:HON), reducing it to $218 from $222, while maintaining a Sector Perform rating on the stock.
The arrangement follows Honeywell’s announcement of the completion of its $4.95 billion acquisition of Carrier’s security business. In addition to this news, Honeywell has updated its guidance to include the Carrier business in its second quarter and 2024 forecasts and also announced changes to its earnings per share (EPS) report.
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 significant modification to the guidance is the inclusion of the Carrier business and the additional financing costs incurred from the acquisition.
RBC Capital has expressed support for Honeywell’s transition to cash EPS, saying the report is in line with the company’s reports with industry peers. Honeywell is set to report financials showing this new reporting method with earnings in the second quarter of 2024.
The completion of this acquisition marks a significant expansion for Honeywell, integrating Carrier’s security business into its operations. The company’s guidance updates and reporting changes reflect efforts to provide clarity to investors and align with common industry practices. Honeywell is expected to release 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: exceeded first quarter earnings expectations, mainly due to the strong performance of its aviation segment. The company reported an 18% increase in sales in its aerospace division, to $3.67 billion. However, Honeywell experienced a slowdown in its industrial and building automation units. Even so, the company’s first-quarter sales rose 3% to $9.11 billion, beating analysts’ estimates of $9.03 billion.
In other developments, Deutsche Bank downgraded Honeywell shares from Buy to Hold, citing the company’s continued underperformance compared to the rest of the industry. The downgrade 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 worth more than $2 billion. The move is part of a broader strategy to align the business around automation, aviation, and the energy transition.
InvestingPro Insights
In light of recent acquisitions and Honeywell’s guidance updates, a look at InvestingPro’s latest metrics provides additional context for investors. Honeywell’s market capitalization is $131.84 billion, reflecting the scale of its operations after the acquisition. The company’s P/E ratio, for the last twelve months to Q1 2024, is 22.94, which is on the higher side and signals that investors can expect strong earnings growth. In addition, Honeywell’s current dividend yield is 2.13%, which is attractive to 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 recommends Honeywell as a prominent player in the Industrial Conglomerate industry, operating with a moderate level of debt and having liquid assets that exceed short-term liabilities. These factors, combined with the company’s consistent profitability and low price volatility, may provide some reassurance to investors amid acquisition-related costs. For those looking for more in-depth analysis, InvestingPro offers some additional tips for Honeywell, which can be accessed by visiting https://www.investing.com/pro/HON. To improve your investment strategy, use coupon codes NOTICE 24 to get an additional 10% discount on annual or bi-annual Pro and Pro+ subscriptions. In total, there are 10 more InvestingPro Tips available that can provide insight into Honeywell’s performance and outlook.
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