Honeywell (NYSE: HON) is scheduled to report its Q1 2023 results on Thursday, April 27. We expect HON stock to trade sideways post-Q1, with its revenue likely landing slightly above and earnings below the street estimates. Although the company will likely benefit from a robust demand environment for its aerospace and building technologies businesses, supply-chain constraints and forex headwinds may weigh on its top-line growth. Also, we believe that HON stock is appropriately valued, 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 Q1 2023 revenues to be around $8.60 billion, reflecting a 3% y-o-y rise and marginally above the $8.52 billion consensus estimate.
- Honeywell’s aerospace business is expected to benefit from increased commercial travel. Performance Materials and Building Technologies segments will likely see sales growth led by pricing actions.
- However, continued headwinds for Safety & Productivity Solutions business, supply-chain constraints, and forex headwinds may weigh on the top-line growth.
- Looking back at Q4 2022, Honeywell reported revenue of $9.2 billion, up 6% y-o-y, led by an 11% rise in Aerospace, an 8% rise in Building Technologies, and a 10% rise in the Performance Materials segment, while Safety & Productivity Solutions segment saw its sales fall 8%.
- 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 Q1 2023 adjusted earnings per share (EPS) is expected to be $1.90 per Trefis analysis, slightly below the $1.92 consensus estimate, and it compares with the $1.91 figure the company reported in the prior-year quarter.
- Honeywell’s adjusted EPS of $2.52 in Q4 2022 reflected a 21% y-o-y rise, primarily due to higher revenues and a 240 bps rise in operating margin.
- The company undertook pricing actions last year, aiding the overall segment profits.
- For the full-year 2023, we expect the adjusted EPS to be higher at $9.00, compared to $8.76 in 2022.
(3) HON stock is appropriately priced
- We estimate Honeywell’s Valuation to be $209 per share, about 6% above the current market price of $197.
- This represents a 23x P/E multiple based on our EPS estimate of $9.00 for 2023, aligning with its last five-year average, implying that HON stock is appropriately priced.
- However, if the company reports upbeat Q1 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.
Given higher inflation and the Fed raising interest rates, HON stock has seen an 8% fall 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||1%||8%||85%|
|Trefis Multi-Strategy Portfolio||1%||9%||244%|
 Month-to-date and year-to-date as of 4/25/2023
 Cumulative total returns since the end of 2016