Battle of the Airborne Dividends: Boeing vs. Honeywell

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 |  Includes: BA, HON
by: Efsinvestment

The Boeing Company (NYSE:BA) and Honeywell International (NYSE:HON) are among the largest American corporations, which are pioneers of aerospace and defence industry. Boeing's market capital is $56.9 billion, whereas Honeywell has slightly lower market cap of $46.8 billion. Both are entrenched companies, founded about 100 years ago. These companies are not exactly in the same business: Boeing is a producer, whereas Honeywell is a supplier. However, they are very much related to each other: Boeing is one of the biggest customers of Honeywell. Here is a brief fundamental analysis of the Boeing Company and Honeywell International Incorporation (data from Finviz):

The Boeing Company, headquartered in Illinois, was embarked on aircraft manufacturing in 1916. Today it has been composed of different business units and serves in commercial airlines, military aircrafts, munitions, space systems and computer services sector in the worldwide with approximately 160,500 employees. Boeing Commercial Airplanes and Boeing Defence, Space & Security are the two largest divisions of the company. It is the biggest company in aerospace and defence industry with a $56.9 billion market cap. The company's P/E ratio is 16.93 which is expected to fall to 14.44 in the next fiscal year. Boeing had an EPS growth of 13.72% this year. Analysts estimate annualized EPS growth of 10.79% for the next five years. P/S is 0.88, and ROE is 98.63%. Wedbush, RBC, Credit Suisse, and Oppenheimer suggested an outperform rating for Boeing, while Deutsche Bank, and Stifel Nicolaus recommend buying. Profit margin is 5.28%, while the company paid a 2.19% yield last year. With a good dividend record, Boeing kept its debt in a downward trend for the last five quarters.

Honeywell International Incorporation was founded in 1920 by Mark C. Honeywell, and incorporated in 1985 as a public firm. As a diversified manufacturing and technology company, Honeywell operates through a variety of segments. Owning a market capitalization of $46.8 billion, the New Jersey-based company has a 20.82 trailing P/E ratio, while forward P/E ratio is 13.06. Earnings increased by 39.47% this quarter, and 26.41% this year. Insider transaction increased by 80.09% during the last six months. RBC and Oppenheimer suggested outperform for the company, while Deutsche Bank and Argus recommend buying. Honeywell has a 1.34 beta value, higher than that of Boeing ' s.

Historical Comparison (Data from Morningstar):

2007

2008

2009

2010

TTM

P/E

BA

16.60

11.70

29.00

14.60

17.90

HON

19.50

8.70

13.80

20.50

20.60

P/B

BA

7.50

-33.30

18.50

17.40

14.50

HON

5.00

3.30

3.40

3.90

4.0

P/S

BA

1.00

0.50

0.60

0.80

0.90

HON

1.40

0.70

1.00

1.20

1.30

P/CF

BA

7.00

-77.50

6.90

16.40

25.10

HON

12.20

6.40

7.50

9.80

15.20

Dividend Yield

BA

1.60

3.75

3.10

2.57

2.18

HON

1.62

3.35

3.09

2.28

2.33

Gross Margin

BA

20.00

17.70

17.20

19.4

19.1

HON

24.0

23.4

25.0

23.5

23.9

Net Margin (%)

BA

6.14

4.39

1.92

5.14

5.27

HON

7.07

7.64

6.97

6.06

6.49

Click to enlarge

Boeing's P/E ratio graph is too wavy, ranging from 11.70 to 29.00 in the last 5 years, whereas Honeywell's P/E ratios are more stable, between 8.80 and 21.10. Dividend yields for both companies have been more or less stable around 2%-3% range. Net profit margin of Honeywell has always been better than that of Boeing's. Both companies are trading with a high premium over their book values.

SUMMARY:

According to data from analysts, investing on Honeywell seems to be more profitable in the long-term. Honeywell and Boeing are not competitors to each other, but Boeing has a serious competitor: Airbus, which is strongly supported by European Council. T-Metrix scores of the two companies; calculated by parameters from current dividend yield, EPS next 5 years, EPS past 5 years, current P/E and forward P/Es; gives us very similar scores. After calculations; it can be seen that Boeing's T-Metrix score is 3.84, whereas Honeywell's score is 4.30. Interpolating the expectations on next 5 fiscal years shows us; despite the fact that Boeing is a larger and better-known company, Honeywell offers security and money for shareholders. Please note that, Honeywell stocks are up by a stunning 50%, since September. One might need to wait for a pullback to $50 levels, before diving in.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.