Honeywell (NYSE: HON) is scheduled to report its Q3 2022 results on Thursday, October 27. We expect HON stock to trend higher post Q3, with the company expected to post revenue and earnings above the street expectations. Although the company is expected to post steady sales growth for its aerospace and building technologies businesses, lower mask sales and forex headwinds may weigh on the overall top-line growth. We believe that HON stock has only a little room for growth from a valuation perspective, as discussed below. Our interactive dashboard analysis of Honeywell’s Earnings Preview has additional details.
(1) Revenues expected to be slightly above the consensus estimates
- Trefis estimates Honeywell’s Q3 2022 revenues to be around $9.1 billion, reflecting a 7% y-o-y rise and compares to the $9.0 billion consensus estimate.
- While Honeywell’s aerospace business is expected to benefit from a rise in travel demand, lower sales of PPE and forex headwinds may weigh on the overall top-line growth.
- Looking back at Q2 2022, Honeywell reported a 2% y-o-y rise in sales to $9.0 billion, led by a mid-to-high single-digit rise in Aerospace, Building Technologies, and Performance Materials & Technologies sales, partly offset by lower Safety & Industrial solutions revenue.
- Our dashboard on Honeywell Revenues offers more details on the company’s top line and its comparison to peers.
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(2) EPS likely to be marginally above the consensus estimates
- Honeywell’s Q3 2022 adjusted earnings per share (EPS) is expected to be $2.19 per Trefis analysis, slightly above the $2.16 consensus estimate.
- Honeywell’s adjusted net income of $1.4 billion in Q2 2022 reflected a 1% y-o-y rise, primarily due to higher revenues.
- The company has undertaken pricing actions earlier this year, which should aid the overall segment profits.
- Also, for the full-year 2022, we expect the adjusted EPS to be higher at $8.90 than $8.06 in 2021, partly led by operating margin expansion in the second half of the year.
(3) HON stock has only a little room for growth
- We estimate Honeywell’s Valuation to be $210, which is 11% above the current market price of $190.
- This represents a 24x P/E multiple based on our EPS estimate of $8.90 for 2022, compared to the last three-year average of 25x.
- However, if the company reports upbeat Q3 results and provides an outlook better than the street estimates, the P/E multiple will likely be revised upward, resulting in higher levels for HON stock.
Note: P/E Multiples are based on Share Price at the end of the year and reported (or expected) Earnings for the full year
While HON stock looks like it has more room for growth, it is helpful to see how Honeywell’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.
Furthermore, the Covid-19 crisis has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised at how counter-intuitive the stock valuation is for 3M vs. AGCO.
With inflation rising and the Fed raising interest rates, among other factors, HON stock has fallen 9% this year. Can it drop more? See how low Honeywell stock can go by comparing its decline in previous market crashes. Here is a performance summary of all stocks in previous market crashes.
|S&P 500 Return||8%||-19%||72%|
|Trefis Multi-Strategy Portfolio||6%||-22%||209%|
 Month-to-date and year-to-date as of 10/26/2022
 Cumulative total returns since the end of 2016