Ignore the Killjoys: Bet on Growth With This Industrial Blue Chip
This election year, the fear mongering of opportunistic politicians is at odds with positive economic indicators and a booming stock market.
Case in point: By big margins, Republican voters think that unemployment has risen and that the stock market has been weak under President Barack Obama. Even in this fact-challenged presidential campaign, both beliefs are patently absurd.
But as Jack Webb would have said on the iconic detective show Dragnet, "Just the facts, ma'am."
And the facts tell us that the economic recovery is proceeding apace and the seven-year bull market is still alive, which bodes particularly well for the industrials sector.
An undervalued industrial stock with superb growth prospectsHoneywell International (HON) - Get Report reports second-quarter earnings on Friday. Honeywell International is a major maker of avionics for commercial and military aerospace, as well as a host of electronics (e.g., climate controls) for homes and businesses.
New-generation aircraft are placing greater demands on pilots, requiring avionics manufacturers to squeeze more capabilities into fewer and smaller components. Pilots multi-task at a furious rate and depend on their cockpit controls more than ever.
To save fuel, avionics also need to be lighter. These imperatives are boosting sales of the ultra-sophisticated, miniaturized avionics provided by Honeywell International.
The company's electronics can be found in cockpits everywhere, for both fixed-wing planes and helicopters.
With a market capitalization of $90.86 billion, Honeywell International commands a vast geographical presence that benefits from rising military spending around the globe. Honeywell International also is a beneficiary of commercial aviation's resurgence, and it counts aircraft maker Boeing as a major client.
Tailwinds for Honeywell International include persistent demand for Boeing's advanced Dreamliner passenger jet, as well as for Lockheed Martin's F-35 Joint Strike Fighter and ever-popular F-16. All three aircraft sport Honeywell International's avionics suites.
Honeywell International in March dropped its bid for rival United Technologies, citing regulatory obstacles. This turned out to be a blessing in disguise, because the supposed synergies between the two defense contractors were overblown and United Technologies' slower growth would have weighed on Honeywell International.
The company has also demonstrated considerable earnings momentum.
The average analyst expectation for second-quarter earnings is $1.64 a share, compared to $1.51 a year earlier. For the third quarter, earnings are pegged at $1.72 a share, compared with $1.60 a year earlier.
For the full year, earnings are projected at $6.66 a share, up from $6.10 in 2015. Earnings for 2017 are expected to be $7.25 a share.
Honeywell International's trailing 12-month price-earnings ratio is just 19.35, low compared with peer General Electric at 44.61 and the industrial-goods sector at 36.79.
Lockheed Martin and General Electric are holdings in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. See how Cramer rates the stocks here. Want to be alerted before Cramer buys or sells LMT or GE? Learn more now.
Honeywell International's shares now trade at about $119.29. The average analyst consensus one-year price target is $125.16, which would represent a gain of about 5%.
The stock has been on a tear lately, up 15.15% year to date.
To get the biggest bang for the buck from this solid blue chip, investors should buy ahead of the likely post-earnings rally.
---
Five years from now, you will probably wish you had grabbed this opportunity. Honeywell International is a smart bet. For those who are looking for other growth opportunities, here is a genius trader who turned $50,000 into $5 million by using his proprietary trading method. For a limited time, he is guaranteeing investors $67,548 per year in profitable trades if they follow his simple step-by-step process. Click here for details.
John Persinos is an editorial manager and investment analyst at Investing Daily. At the time of publication, he held stock in Boeing and General Electric.