What To Expect From Honeywell Stock After It Reports Q3?

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Honeywell

Honeywell (NYSE:HON) is scheduled to report its Q3 2021 results on Friday, October 22. We expect the company to report revenues and earnings above the consensus estimates, driven by a rebound in the overall economic activity, as the global Covid-19 vaccination rate continues to rise. In fact, the company recently revised its long-term business jet deliveries forecast upward by 1%. Business jet flight hours are expected to grow by 50% y-o-y in 2021 and 5% above pre-pandemic levels. [1] We expect the company to navigate well based on these trends over the latest quarter.

Furthermore, our forecast indicates that Honeywell’s valuation is $241 per share, which is 9% above the current market price of $221, implying that the stock has some more room for growth. Our interactive dashboard analysis on Honeywell’s Pre-Earnings has additional details.

(1) Revenues expected to be above the consensus estimates

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Trefis estimates Honeywell’s Q3 2021 revenues to be around $8.7 billion, compared to the $8.6 billion consensus estimate. Now that 68% of the U.S. adult population is fully vaccinated, and on the international front, most of the countries have undertaken large-scale vaccination programs, the global economic growth has picked up pace. Honeywell has also seen a rebound in its sales over the recent quarters. In fact, the company’s total sales grew 18% in Q2 2021, with growth seen across its segments, including the Aerospace segment. Safety & Production Solutions segment, in particular, has seen strong sales growth with revenue rising 42% in the first half of this year, due to continued demand for personal protective equipment (PPE). And now with the Aerospace segment also seeing a rebound in demand, the company’s overall revenues will likely continue to trend higher in the near term. Our dashboard on Honeywell Revenues offers more details on the company’s segments.

2) EPS likely to top the consensus estimates

Honeywell’s Q3 2021 adjusted earnings per share (EPS) is expected to be $2.01 per Trefis analysis, just two cents above the consensus estimate of $1.99. Honeywell’s adjusted net income of $1.4 billion in Q2 2021 reflected a 59% rise from its $0.9 billion figure in the prior-year quarter. This can be attributed to higher revenues and over 450 bps rise in operating margins. As the company sees its sales rebound, the margins are expected to rise further. As such, for the full-year, we expect the adjusted EPS to be higher at $8.05 compared to $7.10 in 2020.

(3) Stock price slightly above the current market price

Going by our Honeywell’s Valuation, with an EPS estimate of $8.05 and a P/E multiple of 30x in 2021, this translates into a price of $241, which is  9% above the current market price of around $221. Furthermore, if the company reports upbeat results, with recovery in sales faster than our estimates, and the guidance for the full-year is revised upward, it will result in HON stock seeing even higher levels.

Note: P/E Multiples are based on Share Price at the end of the year and reported (or expected) Adjusted Earnings for the full year

While HON stock may have some room for growth, 2020 has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised how counter-intuitive the stock valuation is for Honeywell vs Roper.

 

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Notes:
  1. Honeywell Press Release, Oct 11, 2021 []