News

Honeywell International (NASDAQ: HON) delivered a solid quarter, but the company's guidance suggests investors might have to wait for growth. Shares of the industrial conglomerate traded down as much as 3% post-earnings, and were down slightly as of 1 p.m. ET on Thursday.

Strength in part of the business

Honeywell, a manufacturer of industrial, aerospace, and automation products, earned $2.25 per share in the first quarter on revenue of $9.11 billion. That's ahead of Wall Street's expectations for $2.17 per share in earnings on sales of $9.03 billion.

Operating margin improved by 130 basis points year over year to 20.4% thanks to strength in commercial aviation, defense, and space. Honeywell's backlog of future business grew by 6% to $32 billion.

But sales in more economically sensitive areas including industrial automation were down, a reflection of customers being unwilling to commit to new spending at a time when the health of the economy seems uncertain.

CEO Vimal Kapur said Honeywell is experiencing "pockets of recovery" in these so-called short-cycle businesses and is expecting "broader participation as the year unfolds and channels normalize."

The question is how soon that recovery will come. Honeywell expects to earn between $2.25 and $2.35 per share in the current quarter, implying some potential downside to Wall Street's $2.35 consensus estimate.

Is Honeywell a buy following its earnings report?

Honeywell has underperformed the market for several years now as we wait for both the long- and short-cycle parts of the business to take off. That day is coming, but it appears it could be more of a story in the second half of 2024 than something we will see this quarter.

In the meantime, the company continues to deploy its cash for bolt-on acquisitions as well as dividends and share repurchases, offering shareholders a 2.25% yield at current prices while they wait for a recovery. Long-term investors who buy in today are likely to be rewarded over time.

Should you invest $1,000 in Honeywell International right now?

Before you buy stock in Honeywell International, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Honeywell International wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than tripled the return of S&P 500 since 2002*.

*Stock Advisor returns as of April 22, 2024

Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.