Put Honeywell on Your Radar

NEW YORK (TheStreet) -- Sometimes there appears to be more turbulence on the ground than in the air. Right now one of the most turbulent subjects is the federal government and the question of the U.S. fiscal malaise.

The nation's monetary policies are entrusted to the Federal Reserve. On Tuesday, Chairman Ben Bernanke urged Congress and the Obama administration to strike a budget deal to abort the looming possibility of tax increases and spending cuts that could lead to a recession next year.

Without compromise and a series of legal deals, the dreaded outcome often referred to as the "fiscal cliff" will take effect come January. Uncertainty about all these issues appears to be discouraging spending, new investment and troubling investors, the Fed chairman said in a speech to the Economic Club of New York.

Putting an end to the fiscal crisis would prevent a sudden and severe shock to the economy, help reduce unemployment and strengthen growth, he said. "A stronger economy will, in turn, reduce the deficit and contribute to achieving long-term fiscal sustainability," Bernanke told the group.

Sounds like Chairman Bernanke is turning up the heat on lawmakers and the President, and putting all investors on notice the economy is already experiencing turbulence. This may be code for "when the fiscal cliff threat is resolved, the Federal Reserve will open the monetary spigots."

That said, there's good news for investors who hold or want to buy shares of Honeywell ( HON). In a recent video released by Bloomberg, we learned Honeywell has created a radar technology designed to save the airline industry a fortune.

Bad weather is responsible for 70% of cancelled flights, costing the airline industry an estimated $8 billion a year. HON's new equipment will quickly detect severe weather and its concomitant turbulence, thus reducing the associated dangers involved with sudden, unexpected encounters.

The idea is that by installing a storm-detecting radar system made by Honeywell, flights can literally avoid or bypass powerful storm clouds that can cause flight delays and costly cancellations. This new equipment can detect the menacing storm cell up to ten minutes before the plane would make contact.

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To buy this state-of-the-art equipment would cost an airline between $50,000 and $125,000 per plane. But when one considers that weather-related turbulence costs an average of $275,000 per incident, this technology could save an airline millions of dollars per year in maintenance costs alone.

The company claims this is the first aeronautical equipment that detects where hail, lightening and high winds are located in a weather system. Planes can maneuver around storm cell clouds thus avoiding the potential for damaging turbulence and the potential for flight delays and cancellations.

So far only Southwest Airlines ( LUV) has purchased the new technology, equipping around 15 of its planes, according to the Bloomberg story.

The Director for Compliance and Flight Operations at Southwest was quoted as saying, "The system allows our pilots to fly more efficient, smoother, more accurate routes around weather cells which is essential to operating as safely as possible."

Sounds like all airlines need this HON technology.

To help us to see how safe it is to get on board Honeywell shares as an investment vehicle, let's look at a one-year chart that tracks the stock's price and cash from quarterly operations. HON Chart HON data by YCharts

It's been a fairly robust year for both the stock price and HON's profitability. In the quarter ending Sept. 30, year-over-year quarterly earnings growth was a healthy 10.2%. The trailing 12-month gross profit came in at almost $8 billion on slightly higher quarterly revenue growth.

Based on a share price of $60, the dividend yield is currently 2.73%, which represents a payout ratio of 50% of earnings. That price-per-share reflects a forward (one-year) PE ratio of only 12.23, and a price-to-earnings-to-growth (PEG) ratio of only 0.97. These ratios suggest the potential for share price growth.

Honeywell is in fairly good shape when it comes to its balance sheet. As of its most recent quarter it reported total cash of $5.4 billion and total debt of $7.99 billion. Operating cash flow was $3.64 billion with levered free cash flow (TTM) of $1.8 billion.

The best way to learn about Honeywell , what it manufactures and the multiple ways it generates business and profits is to examine the company's easy-to-navigate Web site. Notice the video on the home page from company Chairman Dave Cote on the importance of resolving the U.S. debt crisis.

With a $47.43 billion market cap and growing, Honeywell International is a stock worth accumulating. I'm especially interested if the share price were to pull back to below $59, which it last did on Nov. 16. We might have another opportunity if the "fiscal cliff" rhetoric continues in the weeks ahead.

At the time of publication the author had no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

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