Whether the markets have finally bottomed and are preparing to turn upward, or there will be more downside plunges with continued falling stock prices, one major large-cap stock which has performed solidly – and should continue to do so – is Honeywell (NYSE: HON). This diversified technology and manufacturing company, known mostly for its aerospace and in-home environmental technologies, has shown steady growth in its earnings while performing relatively well in the otherwise poor market performance of most stocks in recent months. Honeywell has maintained its stock price in the mid-50s, closing at 54.29 on Thursday, which is in the mid-range of its twelve-month price range of 45.58 to 62.29.
While this is not a scintillating performance, it is a more than decent performance for a large cap in the midst of what have been bearish conditions. Honeywell, like General Electric (NYSE: GE), shows that not all large caps have had the same vulnerability to both sluggish business conditions and lackluster markets. Honeywell, which has a $41 billion market cap, earned $2.4 billion net income on $34.6 billion revenue in 2007, and was rewarded by seeing its stock price continue to increase overall, as it has for the last five years. More growth for the company’s earnings is expected.
Honeywell’s diversified businesses span four main divisions: the aerospace division; the automation and controls solutions division; the specialty materials division; and the transportations systems division, which produces products for vehicles.
Consumers know Honeywell for its home products, notably in heating, cooling, and security, while its aerospace and defense profile is highly visible as a result of contracts for large projects like the recent $1.5 B contract it signed to provide flight management and surveillance systems for Airbus. Its aviation tie-ins extend not only to commercial airlines, but also to defense and space contractors. In its specialty materials division, Honeywell produces chemical products for use in many industries, including the automotive, healthcare, and agricultural industry. The range and depth of Honeywell’s businesses provide it with an excellent buffer against economic downturns in one or several segments of its businesses, as does its wide client base.
Most analysts have continued to view Honeywell’s prospects as positive, even through the months of market turbulence and the more recent US economic slowdown. It is expected to report, in April, 82 cents-per-share earnings for the quarter ending March, up 24% over the same quarter last year, and 93 cents for its June quarter, another hefty increase of nearly 20% over last year’s same quarter earnings. For 2008, Honeywell is expected to earn $3.76 per share, a substantial increase from the $3.16 of 2007, and looking out to 2009, estimates peg EPS at $4.25. These estimates have held even through the generally poor economy, and may be conservative looking out to the rest of this year and next.
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