Honeywell (NYSE:HON) is scheduled to report its Q4 2021 results on Thursday, Feb 3. We expect HON stock to see little movement due to mixed Q4 with revenues beating consensus estimates, but earnings falling in-line. The overall economic growth likely bolstered the revenue growth in Q4, but with the spread of Omicron, and continued supply chain issues, may have adversely impacted the margin growth. That said, our forecast indicates that Honeywell’s valuation is $248 per share, which is 21% above the current market price of $205, implying that the stock has more room for growth. Our interactive dashboard analysis on Honeywell’s Earnings Preview has additional details.
(1) Revenues expected to be above the consensus estimates
- Trefis estimates Honeywell’s Q4 2021 revenues to be around $8.9 billion, compared to the $8.7 billion consensus estimate.
- While Honeywell’s aerospace business has been a drag on its revenue growth since the beginning of the pandemic, it has started to see some growth over the recent quarters. This trend likely continued in Q4 as well, with the economies opening up gradually, and airplane manufacturers planning to increase production. In fact, aerospace revenues were up 3% to $2.7 billion in Q3, though they were still down 5% for the nine month period ending Sep 2021.
- Honeywell’s safety & productivity solutions has been the key growth driver over the recent quarters, with sales up 33% y-o-y for the nine month period ending Sep 2021, and this trend is expected to continue in the near term. Now, with rising vaccination rates across the globe, the demand for PPE is expected to decline. However, warehouse and workflow solutions, and gas analysis business is expected to continue to see strong growth.
- Our dashboard on Honeywell Revenues offers more details on the company’s segments.
(2) EPS likely to be in line with the consensus estimates
- Honeywell’s Q4 2021 adjusted earnings per share (EPS) is expected to be $2.07 per Trefis analysis, in line with the consensus estimate.
- Honeywell’s adjusted net income of $1.4 billion in Q3 2021 reflected a 28% rise from its $1.1 billion figure in the prior-year quarter.
- This can be attributed to higher revenues and over 180 bps rise in operating margins. However, the spread of Omicron, inflationary headwinds, and supply chain issues, likely weighed on the overall margin growth in Q4.
- As the company sees its sales rebound, the margins are expected to rise in 2022. As such, for the full-year 2022, we expect the adjusted EPS to be higher at $8.98 compared to $7.10 in 2020, and an estimated $8.03 in 2021.
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(3) HON stock has more room for growth
- We estimate Honeywell’s Valuation to be $248, which is 21% above the current market price of $204.
- This represents a P/E multiple of 28x based on our EPS forecast of $8.98 in 2022.
- That said, if the company reports upbeat Q4 results, and 2022 guidance better than the street estimates, it is likely that the P/E multiple will be revised upward, resulting in even higher levels for HON stock.
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 is likely to see little movement in the near term, based on our Q4 expectations, there are several peers in its sector that look like a better bet than Honeywell. Check out how Honeywell Peers fare on metrics that matter. You will find other useful comparisons for companies across industries at Peer Comparisons.
What if you’re looking for a more balanced portfolio instead? Here’s a high-quality portfolio that’s beaten the market consistently since the end of 2016.
|S&P 500 Return||0%||-5%||102%|
|Trefis MS Portfolio Return||-9%||-9%||257%|
 Month-to-date and year-to-date as of 2/1/2022
 Cumulative total returns since the end of 2016