To The Moon

$Honeywell(HON)$ recently posted third-quarter results that fell short of revenue expectations, which, coupled with a downward revision of its full-year sales guidance, caused its stock to decline by more than 5%. Despite these disappointments, I see Honeywell as a potential buy opportunity for several reasons, especially around its support level at $206-$208.

Honeywell reported $9.73 billion in revenue for Q3, an increase of almost 6% year-over-year. However, it fell short of analysts' expectations of $9.89 billion. What caught my attention was that Honeywell still managed to post adjusted earnings per share (EPS) of $2.58, which exceeded forecasts, underscoring its ability to drive profitability even when revenue lags.

While it’s not ideal that they missed on revenue, the earnings beat shows a strong commitment to cost efficiency and profit management. Honeywell’s strategy to divest from lower-margin segments, like PPE, and its focus on growth areas could support further profitability in the long run.

One of the main reasons for the revenue miss was softness in the Industrial Automation division, where sales fell by 5%. Honeywell attributed this to declining volumes in warehouse solutions and safety sensing technologies—sectors that had previously shown robust growth but are now experiencing cyclical downturns. The drop in Industrial Automation revenue could remain a headwind in the short term, but Honeywell’s diversified revenue streams help balance this weakness.

The Aerospace segment, which saw a 12% rise in sales to $3.91 billion, was a bright spot. With demand in defense and space sectors on the rise, this segment should continue to be a strong performer. Additionally, Honeywell’s smaller Building Automation and Energy and Sustainability Solutions units posted growth of 14% and 1%, respectively, which highlights its strategic diversification and resilience against cyclical shifts.

Honeywell lowered its 2024 sales forecast to a range of $38.6 billion to $38.8 billion, down from the previous $39.1 billion to $39.7 billion. This is certainly not the kind of revision I would want to see for an industrial giant, especially given the importance of predictable revenue in this sector. But Honeywell’s long-term focus on streamlining its business structure and spinning off non-core assets, such as the Advanced Materials division, aligns with a clear vision of becoming a leaner, more efficient entity. CEO Vimal Kapur’s comments about the company’s “simplification and optimization” efforts underscore that Honeywell is preparing for more sustainable growth.

Technical Analysis

HON Daily Chart

Today, $Honeywell(HON)$ tested a key support level around $206-$208, and I’m seeing a strong bounce here. This support zone could hold if broader market sentiment doesn’t take a sharp negative turn, and the bounce indicates that buyers are showing up at this level. Given the solid fundamentals, I’d consider selling puts around this support level to generate premium income. However, this depends on the premium's attractiveness; if the premium isn’t high enough to justify the risk, I may pass on this trade.

If the price does hold at this level and shows signs of stability, we might see $HON consolidating and potentially resuming an upward trend, albeit slowly. Honeywell is indeed a “boring stock” as it doesn't offer the same high-growth excitement as tech companies, but the predictability and stability of industrials can make it an attractive income play or long-term hold, especially when acquired at attractive support levels.

Conclusion

Honeywell’s recent revenue miss and lowered guidance are concerning, but I believe the company’s overall strategy and solid EPS growth show that it’s on the right track. With diverse revenue streams, a strong performance in Aerospace, and ongoing simplification efforts, I see this as a company that is positioning itself well for the future.

At the current support level, I’m interested in adding $HON to my portfolio, particularly by selling puts if the premium is worthwhile. The focus on profitability and strategic realignment, coupled with Honeywell’s diversified revenue base, make it an attractive play for those looking for stability and modest growth in the industrials sector.

@MillionaireTiger @Tiger_comments @Daily_Discussion @CaptainTiger @TigerSG

Disclaimer: This is a general analysis and not financial advice. Always conduct your own research before making any investment decisions.