Honeywell also announced plans to spend $25 billion in capital over the next few years.
Dreamstime
Industrial giant Honeywell International checked all the required boxes at its analyst event Thursday. It laid out plans for growing more aggressively and increasing profit margins. That has investors cheering, and shares are up.
Honeywell (ticker:) raised its organic sales growth target to 4% to 7% a year from 3% to 5%. The company also wants to improve operating profit margins by 0.4% to 0.6% a year. The goal had been 0.3% to 0.5%.
The new numbers pushed shares up 1.7% in midday trading. The S&P 500 is flat. The Dow Jones Industrial Average rose about 0.1%.
Wall Street should be OK with the revised objectives, too, since they align closely with Street projections. Analysts expect Honeywell to increase sales about 6% a year on average for the coming three years. And they expect operating profit margins to hit 23.3%, up from 21.3%—improving about 0.67% a year on average.
The higher growth is being driven by existing opportunities to connect and control manufacturing assets as well as new opportunities to make the operations of customers more sustainable.
“Today, we turn our focus to the next phase of Honeywell’s growth, including driving innovation that builds on our long-standing expertise in controls, automation, and software,” said CEO Darius Adamczyk in a statement.
Adamczyk also mentioned what he described as “successful breakthrough initiatives,” such as Honeywell’s free-standing businesses Quantinuum and Sustainable Technology Solutions. Quantinuum is a quantum-computing company; Sustainable Technology Solutions develops sustainable technologies that include more efficient recycling of plastics and better energy storage.
Honeywell also announced plans to spend $25 billion in capital over the next few years, much of it on growth. The company spends roughly $1 billion a year maintaining plants and equipment.
The $25 billion is roughly $10 billion more than projected free cash-flow generation less dividends paid out over the same span. The amount is a sign that Honeywell is willing take on debt to grow.
Coming into Thursday trading, Honeywell shares were down about 11% year to date. Inflation, rising interest rates, and the Russia-Ukraine war have sapped some investor enthusiasm for the stock.
The difficult operating environment led Honeywell to give 2022 earnings guidance below Wall Street expectations. In early February, management guided investors to about $8.55 in per-share earnings this year. Analysts were looking for closer to $9 in EPS.
Write to Al Root at [email protected]
