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Morgan Stanley On Honeywell: 'Is This Quarter A Game Changer?'

Honeywell International Inc. HON reported strong quarterly results, and its core revenues and operating leverage could accelerate going ahead, Morgan Stanley’s Nigel Coe said in a report. He maintained an Overweight rating on the company, while raising the price target from $129 to $130.

While Honeywell has come to be known for its “boring consistency,” the company reported an earnings beat of $0.02 and raised the low end of its guidance range by $0.05 to $6.60-6.70, analyst Nigel Coe noted.

Strategic Path Remains Intact

Honeywell’s long-term strategic path remains “very much intact,” Coe mentioned. He added that while the company continues to deliver weak organic growth, the rate was within the guidance range.

Although Honeywell recorded a core segment miss of $0.03, core revenues are expected to accelerate going ahead, the analyst stated. He added, however, that 4-5 percent for next year seems a little aggressive.

“The reality is that the ongoing CEO transition and the announced departure of the well respected ACS segment president Alex Ismail (viewed by many as the CEO-in-waiting) provides a narrative of organizational flux,” the Morgan Stanley report noted.

Game Changer?

For those wondering whether the latest quarter was a game changer, Coe answered in the negative. He added, “Elster is meaningfully dilutive and so the +10bps segment margin expansion has to be viewed as very solid given headwinds from aero support payments, currency hedges and BS&D mix.”

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Jul 2016Morgan StanleyMaintainsOverweight
Jul 2016BarclaysMaintainsOverweight
Jul 2016Credit SuisseMaintainsNeutral

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