Honeywell: As Good As It Gets

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WG Investment Research


  • The company's 2018 guidance was well-received by the market.
  • HON is a best-of-breed industrial company that deserves a 'premium' valuation.
  • HON shares are a long-term buy at today's price.

On December 13, 2017, Honeywell's (NASDAQ:HON) management team held an investor meeting where it provided the company's fiscal 2018 guidance to the financial community. The 2018 guidance and management's commentary were well-received by the market. HON shares are up only ~1% since the investor meeting, but shares are outperforming the broader market by a wide margin on a YTD basis.

Source: Nasdaq

There was a lot to like about Honeywell's 2018 guidance and, in my opinion, the bull case for this industrial conglomerate may be stronger now than it has ever been. Moreover, I believe that Honeywell is as good as it gets in the industrial space, so investors should not be worried about the company's 'premium' valuation.

The 2018 Guidance - Good, Better, Best

Many people, including myself, were worried when Mr. Darius Adamczyk, CEO, took over for Mr. David Cote in April 2017 but this company has not missed a beat over the last seven-plus months. Mr. Adamczyk has actually done an impressive job winning over the market, as shown by the fact that HON shares are up over 20% since he took over as CEO. More importantly, however, Mr. Adamczyk and team have this company in a great position in a changing industrial environment and it appears that this narrative will likely also play out in 2018.

After initially going over the material from the investor meeting, I thought that Honeywell was going to have a lackluster fiscal 2018, but after further review, it appears that management was just trying to tone down expectations. Why do I think this? It's simple. It is hard denying the fact that it appears more likely than not that the U.S. economy, including the industries that Honeywell operates in, will experience growth over the next 4 quarters. Plus, I believe that management was talking out of the other side of its mouth

ChartHON PE Ratio (Forward) data by YCharts

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This article was written by

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Our President and CIO is a CPA with experience in public accounting and the financial services industry. He earned his Master of Accountancy degree in 2008 and his B.S. in Business Management in 2007. He is also a Level III CFA candidate. He has been intrigued by the market from the start. Over the years, he has learned that long-term investing is a discipline that, if followed, will help contribute to building lasting wealth. As such, most of our articles will be about the investments that we plan to hold for at least 3 to 5 years, as long as the company's story does not change. As a Seeking Alpha contributor, our main goal is to write about the companies that are key to our portfolio with the hope of promoting discussion (for or against the investment) from others within the SA community.Please visit our website for more information about W.G. Investment Research LLC.

Disclosure: I am/we are long HON, GE. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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