Good news among quarterly financial reports was Honeywell’s report of a 6.6 percent increase in quarterly earnings. Is it too early to invest in Honeywell International, HON, or too late? A few weeks back we wrote that US manufacturing contraction threatens investments . Now it appears that one of the large US manufacturing conglomerates has surprised investors with a better than expected second quarter. If you choose to invest in Honeywell International remember that this company is not the Honeywell of old.
Who Is Honeywell International?
Honeywell International, Inc. is a Fortune 100 company employing 130,000 worldwide and nearly 60,000 in the USA. The company deals in aerospace systems, engineering services, and a wide range of commercial and consumer products. The iconic Honeywell product is the round thermostat found in so many American homes. Honeywell was around since the 1920’s and was taken over by AlliedSignal in 1999. The company kept the name Honeywell because of better brand name recognition. Honeywell stock peaked at $63 a share in 1999 at the time of the takeover by AlliedSignal. The stock of new company fell subsequent to the merger, assets were sold off, and Honeywell International stock only regained the $60 range briefly in 2007 and 2008 before the recession hit. In the last decade the best times to invest in Honeywell International were after the merger and in the depths of the recession. Today the company is doing well but, as a large cap stock, is not likely to grow in multiples. Fundamental analysis tells us that the company is substantial, profitable, and widely diversified which protects against loss in any given sector but dilutes growth by any one sector. Invest in Honeywell International for security, not for rapid growth.
Multinational Companies and an International Outlook
Honeywell International is a multinational. It does business at the four corners of the earth. It does business with governments and with other industries. It has a wide range of consumer products. As such Honeywell International tends to rise and fall with the global economy. Invest in Honeywell International and you are, to a degree, investing in global growth. As such this company is affected by the European debt crisis, falling exports and threat of a real estate collapse in China, growth in India, industrial expansion in Brazil, and oil sands and shale developments in Canada. If you believe that the US economy and that of Europe will come through the current fiscal crises unscathed you will probably invest in Honeywell International. If you believe that worse is yet to come you may sell the stock on the uptick that happened with news of a good second quarter. This is a stalwart stock and not one prone to big jumps in price. So, beware of investing tips with Honeywell International. Watch the company financials and balance sheets and, especially, watch the economy because as the economy recovers so will Honeywell International. As always we discuss this stock as an example of thinking through an investment. Do your own fundamental analysis before deciding whether to invest in Honeywell International or avoid the stock.