Honeywell (HON) is a global conglomerate that combines innovative R&D to bring high-quality products to market as it searches for strategic acquisitions to grow its business segments. The company has grown quite a bit in the last year and may level off before it continues to grow. This is a company that investors can count on as a foundation in his/her portfolio. Let's take a look at some of the company's recent product roll-outs as well as strategic acquisitions.
The company increased its presence in the "gas detection portfolio" when it acquired RAE Systems Inc. (RAE) The acquired company manufactures fixed and portable gas/radiation detection systems. This will add a crucial element to Honeywell's Analytics which is a part of Honeywell Life Safety.
RAE's gas/radiation detectors are portable and intended to expedite real-time safety and security threats. There are personal, hand-held, and transportable wireless instruments used by different government and nongovernmental agencies as well as cities, states and entities in other countries. The instruments can be used personally or for full plant safety.
Now Honeywell can offer its customers a complete safety portfolio which addresses every possible "gas" detection that's needed in any industry. This includes the following areas:
- Industrial fire and gas systems
Portable gas detection
Flame and centralized gas monitoring
Systems in commercial building environments
Honeywell has four working divisions, and this particular acquisition will cover the Automations and Control Solutions sector.
Examples of Innovative Products Brought to Market
In its attempt to help reduce domestic energy usage, the company is introducing a new "Wi-Fi enabled thermostat" that works with utilities and house owners to reduce energy costs. Homeowners can reduce their energy consumption through the Automated Demand Response Program the thermostat supports. In fact, homeowners can control the temperature of the house and energy usage from anywhere in the world simply using a smartphone.
South Sioux City is a community that has adopted these thermostats. Its goal is the use of these Wi-Fi thermostats to cut down on energy consumption and expenditures. It has been estimated that using these new thermostats will save the city about $800,000 in energy costs every year. The Wi-Fi thermostat uses Honeywell's Akuacom software to assist utilities in lowering the energy load so that delivery is constant, preventing blackouts. At the same time, two-way communication between utilities and homes can provide constant electrical flow based upon how the thermostat is set.
Innovative Brakes for Police Cruisers
Honeywell's friction materials is releasing a new series of brake pads designed to handle harsh demands that typically would be found in vehicles used by law enforcement officers. These brake pads, called "Bendix" would be able to withstand severe conditions that law enforcement fleets put on their cars. These vehicles are constantly being challenged- accelerating at high speeds, stopping unexpectedly, and creating difficult maneuvers. Because of this they need pads with longer wear-life and higher fade resistance. These pads provide that type of support for this erratic driving.
Is The Company a Good Buy Right Now?
The company has revealed positive earnings growth over the last couple years and I believe it will continue. The company earned $3.70 this year versus $2.33 a year ago and the markets are expecting this to increase to $4.95 this year.
Pay per share has been increased by 16.3% as compared to a year ago.
Net cash flow has improved by 73.97% compared to a year ago. $341 million
Its industry's growth rate (cash flow) is only 0.58%.
It has a debt/equity ratio of 0.57% and this is below the industry average.
If I would have any hesitation, it would be in the sharp rise of the stock over the last year. It has grown by 42% (this year alone is grown by over 20%) and now it seems fairly expensive compared to the rest of its industry.
The new thermostat and the custom brake pads for law enforcement vehicles are just two examples of products that Honeywell designs and brings to the market. The recent acquisition of RAE will now give its larger "Honeywell Life and Safety" segment a well-rounded portfolio to offer complete "gas detection" to plants and other facilities. With a good growth record and solid cash flow, I believe investors should consider Honeywell as a foundation to an investment portfolio if you are not already investing with the company.