Buy Honeywell (HON - Get Report) , sell 3M Co. (MMM - Get Report) . At least, that was the suggestion from Deutsche Bank analysts on Monday. In midday trading, that call has Honeywell stock just above flat on the day, while 3M is down about 70 basis points.
Analyst Nicole DeBlaise argues that Honeywell should experience positive quarterly results, given its "attractive exposure" to late-cycle end markets. For 3M, though, she calls for a 4% earnings miss in the first quarter as too many of the company's end markets have deteriorated.
As a result of these short-term catalysts, DeBlaise has new price targets as well. She's modeling for Honeywell to hit $174 and assigning a price target of $188 to 3M Co. From current levels, it implies 11.5% upside to Honeywell stock and almost 8% downside to 3M.
So what should investors do -- should they sell 3M Co and buy Honeywell?
In the case of past recent performance, DeBlaise is certainly sticking with the winner and cutting loose the loser. Over the past 12 months, Honeywell is up over 10.4% while 3M stock is down about 5%. The year-to-date performance is also quite stark, with Honeywell up 18.4% compared to 3M's 7.2% rally. However, both are down about 4% over the past six months.
One spot where 3M trumps Honeywell stock? Its dividend yield. 3M stock pays out a 2.8% dividend yield, 70 basis points more than Honeywell's 2.1% payout.
But it's not just the dividend. Growth is forecast to -- perhaps surprisingly -- be better for 3M Co than Honeywell this year. Analysts expect sales to decline almost 12% year-over-year for Honeywell in 2019, while forecasts call for growth of 1.8% for 3M Co. Earnings estimates call for roughly flat growth this year for Honeywell and 1.8% growth for 3M this year.
It's not until 2020 that Honeywell outpaces 3M on the earnings and revenue growth front.
Honeywell is a holding in Jim Cramer's Action Alerts PLUS club, whose analysts recently sent out this partial note to members: Following a 2018 year when the company spun off two businesses, we believe the new Honeywell is worthy of a premium to its peer group as it has become less cyclical and more focused with stronger organic sales growth trends. The two segments we remain most positive on for their long-term growth profiles are Aerospace and Safety and Productivity Solution, as both stand to benefit from strong secular trends.
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Trading Honeywell and 3M Co.
Honeywell stock has been robust from the December lows, rallying about 25% from those levels to the recent highs. However, shares of HON topped out just under $160, the highs from late September and early October. That puts in the threat of a potential double top, but let's not get ahead of our skis just yet.
For now, the 20-day moving average is still holding up as support. So is uptrend support (in blue). Below that, we have the significant level of $150 that bulls will ideally like to see hold as support. This mark also has the 50-day just below, at $149.
While a test of the 200-day would be less ideal, it would still leave Honeywell stock stable, provided it holds as support. Ultimately, though, this stock has momentum right now, even if expectations are low for the next few quarters.
3M has had trouble garnering as much bullish momentum as Honeywell, up a little under 20% from its fourth-quarter lows. It's below the 20-day, but still has the 50-day and 200-day nearby. Below $200 and MMM stock would become somewhat concerning, but those worries would increase notably should it lose the backside of prior downtrend resistance (blue line).
If DeBlaise is right in her predictions, 3M stock could struggle with support, while Honeywell may even push through $160 resistance.
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