What’s Driving Honeywell’s Industrial Sales?

Honeywell International’s (NYSE:HON) sales to the industrial sector account for 21% of its revenues. ^[1] The company’s sales to this sector – which includes scanning and mobility products, sensing and control products, safety equipment and advanced materials such refrigerants, chemicals and resins – have grown significantly in the past few years. In this article, we take a look at the trends driving growth in sales of these products and how they may impact Honeywell in the future.

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Demand For Data Capture Devices On The Rise

Honeywell’s Scanning and Mobility business has been one of the major driving forces behind its growing sales to the industrial sector. The business offers mobile computers and scanners such as barcode scanners and radio frequency identification (RFID) scanners, that help collect image, laser and voice-based data. These devices help in automatically, efficiently and accurately capturing data, and are mostly used in industries such as healthcare, retail, transportation and package delivery. Companies in these industries are increasingly adopting such products since they help increase productivity by removing the need to manually capture data, which is often a slow process and prone to human error. This trend is expected to drive growth in the global Automatic Data Capture industry at an average rate of 12.29% per year from 2012 through 2016. ^[2]

Honeywell’s Scanning and Mobility business has continued to expand due to its acquisition spree since 2007. In 2013, Honeywell acquired Intermec, a leading provider of mobile computing equipment, radio frequency identification (RFID) scanners and tags, bar code scanners, and printers. With the acquisition, Honeywell has been able to significantly increase its market share and revenue in the scanning and mobility industry through Intermec’s vast product line.

Most recently, Honeywell acquired Datamax-O’Neil, a manufacturer of fixed and mobile printers used in retail, warehouse and health care industries. ^[3] The acquisition, which was completed this month, positions Honeywell to expand into the $1.5 billion global bio-code printing industry.

Construction Activity Growth To Bolster Industrial Sales

Sales of Honeywell’s safety and security, and sensing and control products are largely dependent on residential and non-residential construction. New residential and commercial buildings are likely to use these products in order to create a safe and comfortable environment and adhere to safety regulations.

Both residential and non-residential construction activity have been growing in the U.S. We believe that the trend is likely to continue driving growth in sales of Honeywell’s safety and security, and sensing and control products. The Architecture Billings Index (ABI), a leading indicator for non-residential construction activity in the U.S., was in positive territory for the ninth consecutive month in December at 52.2, before declining to 49.9 in January, just below normal levels. ^[4] However, new design contracts and project inquiries remained strong in January, indicating that non-residential construction activity in the U.S. is likely to continue its momentum, fueling the demand for safety and security, and sensing and control products. The growth in housing starts should also contribute to sales of these products. The National Association of Home Builder forecasts an 11% increase in housing starts in 2015. ^[5] Apart from growth in developed countries, increased urbanization and stricter safety regulations in developing countries will also drive sales.

Growing Demand For LGWP Materials

In September 2014, Honeywell announced that it will increase production of its low global warming potential (LGWP) refrigerants, insulation materials, aerosols and solvents. To this end, it started full-scale production of its Solstice line of low-global-warming materials at the Honeywell Fluorine Products facility in Baton Rouge on January 6. ^[6] At the fourth quarter earnings meeting, Honeywell announced that it had seen strong demand for these products and has already signed agreements worth $2.3 billion, with many more under negotiation. ^[7]

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1. Honeywell 2015 Investor Conference Presentation Part 1, March 4, 2015, www.honeywell.com [↩]
2. Global Automatic Data Capture Market 2012-2016, October 15 2013, www.technavio.com [↩]
3. Honeywell Completes Acquisition Of Datamax-O’Neil, March 2, 2015, www.honeywell.com [↩]
4. AIA Architecture Billings Index, www.aia.org [↩]
5. NAHB Housing and Interest Rate Forecast, March 3, 2015, www.nahb.org [↩]
6. Honeywell Starts Full-Scale Production Of Low-Global-Warming Propellant, Insulating Agent, And Refrigerant, January 6, 2015, www.honeywell.com [↩]
7. Honeywell’s (HON) CEO David Cote on Q4 2014 Results – Earnings Call Transcript, January 23, 2015, www.seekingalpha.com [↩]