With Honeywell, everything is under control

Posted Dec 18th 2007 7:30PM by Joseph Lazzaro
Filed under: Honeywell Intl (HON), Stocks to Buy

It's a Wall Street axiom, but one that's worth repeating in choppy markets: diversity provides greater safety. That's diversity across a portfolio, and diversity within a company, and a good example of the latter is Honeywell International Inc. (NYSE: HON).

Thermostats and aircraft maintenance would seem like business lines at opposite ends of the spectrum, but they are at Honeywell's core, and they speak to the company's strength.

Analysts like HON's aerospace division (36% of revenue), which manufactures cockpit controls, power generation equipment, and wheels/brakes for commercial/military aircraft. The division also makes jet engines for regional/business jet manufacturers.

Further, analysts really like HON's automation/control division (35% of revenue), which makes home/office climate control equipment. Analysts see solid demand for HON's next-generation energy-efficient controls as businesses and homeowner re-emphasize energy efficiency, due to high energy prices. The Reuters F2007/F2008 EPS consensus estimates for HON are $3.16 to $3.73.

The risks? Analysts are keeping an eye on HON's component and raw material costs, as well as global economic growth, due to the company's above-average sensitivity to the global economic cycle.

The First Call mean rating for HON is: Buy. [17 firms.] Mean 2008 target: $67. [high: $72, low: $61.]

Stock Analysis: Honeywell is a moderate-risk stock not suitable for low-risk investors. Investors with an investment horizon longer than 2 years should be rewarded from HON's shares. Sell/Stop Loss if you were to purchase shares in this company: $38.

Tags: aerospace, aerospace sector, air conditioning systems, control systems, heating systems, HON, Honeywell, thermostats