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Honeywell Hits New Highs Ahead of Report

Honeywell shares are sitting at 52-week highs ahead of the company's first-quarter report on Friday.
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(HON) - Get Honeywell International Inc. Report

shares look to have a little bit of room to run as the industrial conglomerate readies to report its first-quarter results Friday, but upside appears limited in the near term.

The stock has appreciated nicely in recent weeks. Over the past three months, the maker of products ranging from jet engines to technology for wireless printers has seen its stock rise more than 15%, roughly equaling the performance of


(XLI) - Get Industrial Select Sector SPDR Fund Report

, a popular industrial sector exchange traded fund. That compares to a 10% rise in the S&P 500 index over the same time period.

On March 30, Honeywell boosted its outlook, saying it now expects earnings of 45 to 49 cents per share, up from the 40-45 cent per share range it forecasted earlier. Despite that bullish sign and the positive analyst notes that followed, the shares have lagged the XLI a bit since that date.

Pension accounting at Honeywell is one factor that gives Sanford Bernstein analyst Steven Winoker reason for optimism.

"It is well known that Honeywell's pension accounting rules are more conservative

than peers," Winoker wrote in an April 12 note in which he upped his price target to $52 from $45. Honeywell shares were up 31 cents to $47 in late trades on Thursday, and their session-high of $47.05 is the best level in the past year. The stock was up 19.1% year-to-date through Wednesday's close.

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Deutsche Bank analyst Nigel Coe is another Honeywell bull. He raised his price target to $50 on March 30, the same day Honeywell upped its estimates. Coe wrote that a Honeywell division it calls Automation and Control Solutions (ACS), which makes gas detection and home heating products, should be at the high end of the range given by Honeywell. Coe is forecasting ACS will deliver $3.15 billion of the overall $7.7 billion in revenues he expects to see in the quarter. Assuming Honeywell can deliver that $7.7 billion number, it would be 1.7% higher than the first quarter of 2009.

The average estimate of analysts polled by

Thomson Reuters

is for earnings of 47 cents a share in the March period on revenue of $7.58 billion. That projection compares to a profit of 54 cents a share in the same period a year earlier, and earnings of 91 cents a share in the fourth quarter.

Honeywell looks a bit cheap on a price-to-earnings basis. According to


data, it trades at 18.73 times estimated 2010 earnings, versus an average of 22.07 for 50 other industrials.

Still, there are reasons for caution.

General Electric

(GE) - Get General Electric Company Report

still showed weakness in several of its industrial businesses when it reported its first-quarter results last week. If Honeywell shares trade sharply higher Friday, it might be an excuse to take some money of the table.


Written by Dan Freed in New York