What To Expect From Honeywell Stock Post Q4?

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Honeywell

Honeywell (NYSE: HON) is scheduled to report its Q4 2022 results on Friday, February 3. We expect HON stock to trend lower post-Q4, with its revenue and earnings likely falling marginally below the street estimates. Although the company is expected to post strong sales growth for its aerospace and building technologies businesses, lower mask sales, supply-chain constraints, and forex headwinds may weigh on the overall top-line growth. Also, we believe that HON stock is fully valued, as discussed below. Our interactive dashboard analysis of Honeywell’s Earnings Preview has additional details.

(1) Revenues expected to be marginally below the consensus estimates

  • Trefis estimates Honeywell’s Q4 2022 revenues to be around $9.2 billion, reflecting a 6% y-o-y rise but marginally below the $9.3 billion consensus estimate.
  • Honeywell’s aerospace business is expected to benefit from a rise in commercial travel. Performance Materials and Building Technologies segments will likely see sales growth led by pricing actions.
  • However, lower sales of PPE, supply-chain constraints, and forex headwinds may weigh on the overall top-line growth.
  • Looking back at Q3 2022, Honeywell reported revenue of $9.0 billion, up 6% y-o-y, led by a 9% rise in Aerospace, an 11% rise in Building Technologies, and an 8% rise in the Performance Materials segment.
  • Our dashboard on Honeywell Revenues offers more details on the company’s segments and sales.
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(2) EPS likely to be below the consensus estimates

  • Honeywell’s Q4 2022 adjusted earnings per share (EPS) is expected to be $2.46 per Trefis analysis, below the $2.52 consensus estimate, and it compares with the $2.09 figure the company reported in the prior-year quarter.
  • Honeywell’s adjusted net income of $1.5 billion in Q3 2022 reflected an 8% y-o-y rise, primarily due to higher revenues.
  • The company undertook pricing actions last year, aiding the overall segment profits.
  • Also, for the full-year 2023, we expect the adjusted EPS to be higher at $9.42, compared to $8.06 in 2021 and an estimated $8.72 in 2022.

(3) HON stock is fully valued

  • We estimate Honeywell’s Valuation to be $208 per share, which aligns with the current market price of $206.
  • This represents a 22x P/E multiple based on our EPS estimate of $9.42 for 2023, compared to the last four-year average of 23x, implying that HON stock is appropriately priced.
  • However, if the company reports upbeat Q4 results and provides the 2023 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 appropriately priced, 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.

Despite higher inflation and the Fed raising interest rates, HON stock has risen 1% in the last twelve months, compared to an 11% fall for the broader S&P500 index. But can it drop from here? 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.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

Returns Jan 2023
MTD [1]
2023
YTD [1]
2017-23
Total [2]
 HON Return -4% -4% 86%
 S&P 500 Return 5% 5% 80%
 Trefis Multi-Strategy Portfolio 9% 9% 243%

[1] Month-to-date and year-to-date as of 1/31/2023
[2] Cumulative total returns since the end of 2016

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