According to the latest cover story published on May 11, 2015 in Barron’s, America’s financial weekly, Honeywell International Inc. (HON, Financial) is one of the top performers in the industrial group. Priced at $102.12 per share with a last-quarter profit of 10%, Barron’s endorsed the proficient and consistent performance of the multinational conglomerate in the last decade with a prediction of a further rise in stock prices to 20% in 2015 increasing incrementally by almost 10% every year to touch a high of 50% in the coming five years. Under the able leadership of CEO David Cote, the Morristown, New Jersey-based industrial powerhouse has been growing from strength to strength exhibiting a focused vision, systematic approach to achieving targets, healthy balance sheet with $7 billion in cash and consistently improving margins. In the last 13 years, Honeywell’s stock has shown staggering growth of 200% with sales doubling to $40 billion, and a surge of $20 billion in market value to stand at $80 billion.
Honeywell and its development plan
Honeywell International Inc. was formed in 1999 by the merger of known brand of Honeywell Inc. and the considerably bigger Allied Signal. This Fortune 100 American company deals in the design and manufacture of a variety of commercial products for industrial as well as consumer applications boasting of superior quality engineering services and top class innovations in the aerospace sector serving multitude of clients from governments to private customers and big enterprises. In a tough environment with strong competitors like General Electric Company (GE, Financial) suffering losses and announcing major restructuring and divestitures plans for revitalization, Honeywell had a relatively good quarter with climbing earnings at $1.1 billion prompting an optimistic pay out forecast for the year at $6 to $6.15 per share from the previous $5.95 to $6.15. Riding high on successfully achieving targets set in 2014 in an ambitious five year, the Honeywell team is now focusing on boosting its credibility and growth with a new five-year plan extending to 2018. Honeywell has also displaced GE as the first choice for top professionals with CEO Cote successfully creating a high-performing, positive work environment with huge potential to grow and a fully funded pension benefit scheme since he took over the helm in 2002. The Honeywell Operating System “Gold” program is his latest initiative in empowering his managerial executives at 74 units divided under the defined revenue generating segments of aerospace and avionics, performance-materials and automation and control that are poised to contribute 39%, 25% and 36% to overall sales. With diverse business interests from the production of iconic home thermostats to composite airplane-cockpit controls, top in line security systems and industrial turbochargers, the American multinational has also spread its reach globally with majority of the revenue coming from domestic markets at 45%, 32% from developed countries and developing countries like India and China accounting for 23 % of revenue generation.
The next five years
With growing focus on emerging international markets and conservative approach to potential attainments, Honeywell is currently exploiting the best mix of high margin growing businesses with low operating costs and amplified productivity. The CEO expressed plans of growing sales by 4% to 6% on an average every year from existing dealings to boost total revenue to around $50 billion with a scope of added $5 billion to $8 billion in revenue from possible initiatives in strategic mergers and acquisitions.
With the promise to continue "over performing," Honeywell investors have exciting days to look forward to.
