Honeywell: The Pivot Appears To Be Working

Feb. 06, 2019 8:28 AM ETHoneywell International Inc. (HON)6 Comments
WG Investment Research profile picture
WG Investment Research


  • Honeywell reported better-than-expected Q4 2018 results and its management team raised their fiscal 2019 guidance.
  • Management's recent pivot - i.e., asset spinoffs and restructuring efforts - is already paying dividends but, more importantly, Honeywell appears to be well-positioned for 2019 and beyond.
  • I am long Honeywell and I plan to stay long for the foreseeable future.
  • This idea was discussed in more depth with members of my private investing community, Going Long With W.G.. Start your free trial today »

Honeywell (NASDAQ:HON) ended 2018 with a bang. The industrial conglomerate reported Q4 2018 financial results that beat the top and bottom line estimates, and its management team raised their fiscal 2019 guidance. The stock has been on an upward trend since the start of 2019, which was helped by the Q4 beat and raise, but HON shares are still underperforming the broader market over the last year.

ChartData by YCharts

However, as I have consistently described over the last few years, I believe that the pullbacks in HON shares should be viewed as long-term buying opportunities. Moreover, in my opinion, the company's Q4 and full-year 2018 results show that the long-term bullish thesis remains intact, even after factoring in the recent pivot (i.e., restructuring efforts and asset spins).

The Latest, The Pivot Appears To Be Working

On February 1, 2019, Honeywell reported adjusted EPS of $1.91 (vs. the estimate of $1.89) on revenue of $9.73B (vs estimate of $9.70), which compares favorably to the year-ago results (excluding the spinoff impact).

Source: Q4 and Full-year 2018 Earnings Presentation

As shown, Honeywell's quarterly results were strong across the board. Organic sales were up 6% YoY, which was primarily a result of strength seen in aerospace (commercial and U.S. defense) and warehouse automation (a key growth driver for this company). Additionally, Honeywell's adjusted EPS were higher YoY (excluding spin impact) and, importantly, the company continued the long streak of improving its cash conversion.

However, as I previously described here, I believe that Honeywell's margins are the real story for this industrial conglomerate (and its stock), so it is encouraging that the most recent results showed further progress toward management's goal of eliminating unnecessary costs and expanding margins for each of its operating segments.

Source: Q4 and Full-year 2018 Earnings Presentation

It is important

ChartData by YCharts

ChartData by YCharts

This article was written by

WG Investment Research profile picture
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, REZI, GTX, 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.

Recommended For You

Comments (6)

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.