NEW YORK (The Deal) -- Honeywell International (HON) - Get Report has managed to weather strong dollar problems that have wreaked havoc on multinationals in recent years, reporting second-quarter earnings up 9% year-over-year, despite seeing revenue fall 4.5%.

But cost-cutting can only take Honeywell International so far, and sooner or later the industrials giant is going to need the sort of spark that a large mergers and acquisitions deal can provide.

On an annualized basis, Honeywell International's sales have been largely flat for the past few years.

Honeywell International is split among aerospace, automation control and performance materials, and an acquisition in any of those three segments is possible.

The company has said that any deals must be accretive by the second year and generate a return on investment above 10% five years out, a level of discipline that has kept it on the sidelines in recent years and might limit its options when trying to do a deal.

The company doesn't comment on deal speculation, but Cote and other executives were notably silent about acquisitions during the most recent call than they have been in quarters past.

Deal makers in the industrials sector continue to say that Honeywell International is actively on the prowl.

Cowen & Co. analyst Gautam Khanna sees opportunities for Honeywell International to expand in the aircraft connectivity industry, a market of perhaps $400 million worth of annual revenue but estimated to grow into the billions on cheaper transmission fees and better high-speed data, coupled with more advanced airplane electronics that collect increasing amounts of data.

Recent events are also pushing airlines to invest in the technology needed to transmit more data in flight. The unresolved crash of Malaysia Airlines flight 370, for example, has renewed calls for airlines to keep better tabs on aircraft operating over the open ocean.

Honeywell International is already a major vendor of aerospace components, including a range of aviation electronics that would complement a connectivity platform, but Khanna said that fierce competition, a number of well-entrenched incumbents and the company's lack of an airline sales channel make organic growth in the sector difficult.

Fortunately, there are many potential targets out there that would give Honeywell International scale overnight, including Teledyne Technologies (TDY) - Get Report and Astronics (ATRO) - Get Report, he said.

A streamlined B/E Aerospace (BEAV) , which last year spun off KLX (KLXI) - Get Report to create more of a pure-play aerospace vendor, could also be of interest to Honeywell International

All those companies carry market capitalizations of less than $6 billion, within the range of what analysts expect Honeywell International could be willing to spend on the right deal.

Wall Street craves discipline but rewards growth. Honeywell International is to be commended for outpacing the Dow Jones Industrial Average year to date, despite choppy revenue. For the outperformance to continue, it appears time for Honeywell International to get serious about buying.

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