Buy Honeywell Stock, Says Analyst. It’s a Play on Air Travel and Automation.

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Honeywell stock fell last year, while the S&P 500 rose nearly 27%.

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dream time

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Rising demand will make this year a turning point for Honeywell International,
That’s according to UBS analyst Markus Mittermeyer, who upgraded the shares on Friday.

Honeywell’s stock was up 1.6% at $214.20 in early trading. The S&P 500 had added 0.2%. The Dow Jones Industrial Average was flat.

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Mittermaier changed his rating from hold to buy, while he raised his target for the stock price from $229 to $237. This is nearly 25 times higher than their estimate of $9.34 in 2022 earnings per share. The S&P 500 trades for about 21 times the projected 2022 numbers.

That’s a 25x premium valuation, but Mittermeyer sees Honeywell’s (ticker: HON) growth accelerate. “We expect an upside surprise from growth in ’22 and ’23,” the analyst wrote in a Friday report. Aerospace accounts for about a third of Honeywell’s sales, and Mittermeier sees global air travel recovering from the pandemic.

The growing demand for automation solutions will also help the company. Honeywell would benefit from the “capital spending split” [in] Process Automation and Oil & Gas Exposure,” wrote Mittermaier. The automation and energy segments account for nearly half of Honeywell’s sales.

Honeywell’s productivity-solutions segment includes products for things like warehouse automation but it sells process automation solutions in its energy division.

“With the stock trailing at 21, underperforming [peers] Risk/reward at current levels is attractive given the expected turnaround,” Mittermeier said. Honeywell stock dropped 2% in 2021, while the S&P added about 27%.

Honeywell investors can welcome the optimism. Shares have been downgraded several times over the past few weeks by analysts at Credit Suisse and Bank of America. Credit Suisse analyst John Walsh sees more upside in stocks like General Electric (GE), so he downgraded Honeywell to upgrade GE. BofA analyst Andrew Obin was more concerned about supply-chain problems and growth in the first half of 2022.

Following all the recent moves, about 60% of analysts rate Honeywell shares as buy. The average buy-rating ratio for stocks in the S&P 500 is approximately 55%. The average analyst price target for Honeywell stock sits at around $240 per share, representing a gain of about 12% from recent levels.

Write to Al Root at [email protected]

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