Honeywell (NYSE: HON) is set to release its Q1 2024 results on April 25, with expectations of reporting revenue of $9.1 billion and adjusted earnings of $2.19 per share, slightly above consensus estimates. The company is anticipated to benefit from increased aftermarket services for commercial aerospace, although tough comparisons for warehouse automation may impact sales growth. Despite this, Honeywell’s stock, currently trading around $195, has potential for growth. Analysts suggest that the company will have a positive Q1, with a more detailed analysis available in their interactive dashboard.
The performance of HON stock in recent years has been mixed, with little change from early 2021 levels of $215 to around $195 currently. In comparison, the S&P 500 increased by approximately 35% over the same period. HON underperformed the S&P in 2021 and 2023, with returns of -2% and 3% respectively. In contrast, the Trefis High Quality Portfolio, consisting of 30 stocks, outperformed the S&P each year, suggesting better returns with less risk compared to individual stocks and the benchmark index.
With uncertainties in the macroeconomic environment such as high oil prices and elevated interest rates, the question arises whether HON could underperform the S&P in the coming months. However, from a valuation perspective, HON stock appears undervalued, with an estimated valuation of $226 per share, over 15% above the current market price. This is based on an EPS estimate of $9.97 for Honeywell in 2024, resulting in a 23x P/E multiple that aligns with the stock’s average over the last three years.
In the previous quarter, Honeywell reported revenue of $9.4 billion in Q4, up 3% year-over-year, with Aerospace and Performance Materials leading the growth. However, Building Technologies and Safety & Productivity segments saw declines in sales. The operating margin contracted in Q4, resulting in adjusted earnings of $2.60 per share. For the upcoming quarter, a similar trend is expected, with Aerospace driving sales growth while Safety & Productivity faces challenges. Honeywell expects a slight margin expansion overall in 2024, with more favorable results projected for the second half of the year.
Looking ahead, Honeywell’s peers and industry comparisons are important considerations for investors. While HON stock seems appropriately priced, it is worthwhile to assess how it stacks up against its competitors. Investors can find valuable insights on Peer Comparisons to make informed decisions about investing in Honeywell and other companies across various sectors. Overall, despite challenges in certain segments, Honeywell is poised for growth and positive performance in Q1 2024.
