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Honeywell (HON) is in an enviable position with products and services ranging from aerospace and defense to healthcare and medical to safety and security. It is diverse and has its foot print in a number of areas with annual revenue approaching $40 billion. Its recent earnings report on April 20 was a typically solid performance as it beat EPS estimates by 5 cents with revenue growing 7% y/y. HON was also able to raise its FY12 EPS guidance. There were a number of factors behind the positive results. The Chairman and CEO, David Cote, said that "we've seen good momentum in the U.S. and our key high growth regions, which is more than offsetting softness in Europe impacting our short-cycle businesses. Our long-cycle businesses, namely commercial aerospace and UOP, had particularly strong growth, overdriving expectations in the quarter. .."

Despite the positive results and raised guidance, HON is trading at about where it should be as all of the valuation metrics suggest that the stock is fairly valued or a bit overvalued. Below is an in depth look at the valuation metrics and stock chart.

Valuation: Honeywell's trailing 5 year valuation metrics suggest that the stock is overvalued as all of the metrics are above their respective 5 year averages. Honeywell's current P/B ratio is 4.1 and it has averaged 3.8 over the past 5 years with a high of 5.6 and low of 2.7. Honeywell's current P/S ratio is 1.3 and it has averaged 1.1 over the past 5 years with a high of 1.4 and low of 0.6. Honeywell's current P/E ratio is 21.9 and it has averaged 20.1 over the past 5 years with a high of 36.2 and low of 11.3.

Price Target: The consensus price target for the analysts who follow Honeywell is $68. That is upside of 12% from today's stock price of $60.57 and suggests that the stock is fairly valued at these levels. This also suggests that the stock has limited upside and should be avoided at its current stock price.

Forward Valuation: Honeywell is currently trading at about $61 a share with analysts expecting EPS of $5.03 next year, an earnings increase of 12% y/y, for a forward P/E ratio of 12. Taking a look at the company's publicly traded comparisons will give us a better idea of the stock's relative valuation. General Electric (GE) is currently trading at about $20 a share with analysts expecting EPS of $1.76 next year, an earnings increase of 14% y/y, for a forward P/E ratio of 11.1. Textron (TXT) is currently trading at about $27 a share with analysts expecting EPS of $2.31 next year, an earnings increase of 18% y/y, for a forward P/E ratio of 11.6. United Technologies (UTX) is currently trading at about $82 a share with analysts expecting EPS of $6.73 next year, an earnings increase of 22% y/y, for a forward P/E ratio of 12.1. The mean forward P/E of Honeywell's competitors is 11.6 which suggests that Honeywell is fairly valued relative to its publicly traded competitors.

Earnings Estimates: Honeywell has beat EPS estimates every time in the past 4 quarters. The company's EPS figures have come in between 1 cents and 10 cents from consensus estimates or about 1% to 10% from analyst estimates. The company has reported earnings that have differed from analyst estimates by a small margin which suggests that the stock should experience limited upside from earnings surprises.

Price Action: Honeywell is down 0.4% over the past year, underperforming the S&P 500, which is up 5.3%. Looking at the technicals, the stock is currently above its 50 day moving average, which sits at $59.63 and above its 200 day moving average, which sits at $53.20.

Source: Honeywell: Solid Performer With Bright Outlook But Limited Upside From Current Prices