Honeywell Raises Long-Term Growth Target to 4-7% – What That Means For Its Stock?

Honeywell International, which manufactures parts for planes made by Boeing and Airbus SE, outlined aggressive plans for long-term growth and increased profit margins at its investor day on Thursday.

The Charlotte North Carolina-based company lifted its organic sales growth target to 4% to 7%, up from the previous projections of 3%-5%. The company also aims to increase operating profit margins by 0.4%-0.6% every year, compared to its previous target of 0.3%-0.5%.

“Key growth drivers will be Breakthrough Initiatives such as Quantinuum and Sustainable Technology Solutions, as well as accelerating transformation efforts. In terms of runway, SPS is expected to grow at a HSD rate, with both HBT and PMT expanding MSD-HSDs with Aero expanding at a MSD growth rate. Focus areas include new products introductions which is targeted to be 33% of sales in 2023 (vs. 31% in 2021),” noted Sheila Kahyaoglu, equity analyst at Jefferies.

Jefferies gave a price target of $198 with a “Hold” rating.

At the time of writing, Honeywell stock traded 0.24% lower at $186.98 on Monday. The stock slumped more than 10% so far this year after falling nearly 2% in 2021.

Analyst Comments

“Honeywell (HON) expanded its long-term targets, which were underpinned by growth drivers across the portfolio. Through a thematic lens, HON offers reasonable valuation vs. other megatrend names but with so much diversity that disclosure and tracking will be necessary,” noted Joshua Pokrzywinski, equity analyst at Morgan Stanley.

“Honeywell’s (HON) long-cycle businesses should start to recover more substantially later in 2021 with Aero’s trajectory less certain. We expect Aero to remain weak through 2021 as flight hours see sharp declines and maintenance gets deferred until 2022. The company’s software offerings should be very attractive to customers as digital transformation accelerates post-COVID and we believe this can partially offset the delayed recovery related to the longer cycle core businesses. We see HON’s balance sheet capacity and repatriation potential as attractive, especially given management’s discipline in M&A to appropriately balance growth, value, and disruption.”

Honeywell Stock Price Forecast

Fifteen analysts who offered stock ratings for Honeywell in the last three months forecast the average price in 12 months of $226.93 with a high forecast of $248.00 and a low forecast of $209.00.

The average price target represents a 21.85% change from the last price of $186.23. Of those 15 analysts, seven rated “Buy”, eight rated “Hold”, while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price to $212 with a high of $238 under a bull scenario and $156 under the worst-case scenario. The investment bank gave an “Equal-weight” rating on the worldwide technology and manufacturing company’s stock.

Several analysts have also updated their stock outlook. Deutsche Bank raised the target price to $243 from $237. Cowen and company lowered the price objective to $230 from $250. Jefferies slashed the price target to $198 from $230.

However, technical analysis suggests it is good to sell as 100-day Moving Average and 100-200-day MACD Oscillator shows a strong selling opportunity.

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