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Honeywell International Inc. HON has been benefiting from strength in its commercial aviation aftermarket business, driven by solid demand in the air transport and business aviation markets. In the third quarter of 2024, its commercial aviation aftermarket sales increased 8% year over year. Also, solid momentum in the commercial aviation original equipment business, backed by an improvement in build rates and an increase in air transport hours, has been favorable. In the third quarter, sales from this business grew 10% year over year.

Robust momentum in HON’s defense and space business, driven by stable international and U.S. spend volumes has also been driving its Aerospace Technologies segment’s performance. In the third quarter, sales from the business surged 18% year over year. Exiting the third quarter, the company’s overall backlog grew 10% year over year to $34 billion. For 2024, it expects overall revenues to be in the range of $38.6-$38.8 billion, with organic revenues expected to be up 3-4% on a year-over-year basis.

The company intends to strengthen and expand its businesses through acquisitions. In October 2024, the company closed the acquisition of Civitanavi Systems S.p.A. for about €200 million ($217 million) to boost its portfolio of aerospace navigation solutions. Also, in September, it acquired CAES Systems from private equity firm Advent. The transaction will augment its defense technology offerings across various domains, including land, sea, air and space.

Apart from this, in June, it acquired Carrier’s Global Access Solutions business for an all-cash deal of $4.95 billion. This acquisition will position HON to become a leading provider of security solutions for the digital age. Acquisitions had a contribution of 2.1% to the company’s sales in the third quarter.

HON remains committed to rewarding its shareholders through dividend payouts and share buybacks. For instance, in the first nine months of 2024, it paid out dividends of $2.16 billion and repurchased shares worth $1.2 billion. Also, the quarterly dividend rate was hiked by 5% in September 2024.

HON Stock’s Price Performance

In the past six months, this Zacks Rank #3 (Hold) company’s shares have gained 11.8% against the industry’s 7.7% decline.

Headwinds for HON

The company has been witnessing weakness in the warehouse and workflow solutions businesses due to lower demand for projects, which has been affecting the Industrial Automation segment's performance. Also, the weak demand for its products and solutions within the sensing and safety technologies business is worrisome. In third-quarter 2024, the Industrial Automation segment’s sales declined 5% on a year-over-year basis.

Also, high debt levels remain a major concern for the company. For instance, Honeywell exited the third quarter with long-term debt of $25.9 billion, higher than $16.6 billion at 2023-end. This increase in its debt level was primarily attributable to the funds raised for the Civitanavi Systems, Global Access Solutions and CAES acquisitions. Considering its high debt level, cash and cash equivalents of $10.6 billion do not look impressive.

Key Picks

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