Morgan Stanley On Honeywell: 'Is This Quarter A Game Changer?'

Honeywell International Inc. HON reported strong quarterly results, and its core revenues and operating leverage could accelerate going ahead, Morgan Stanley’s Nigel Coe said in a report. He maintained an Overweight rating on the company, while raising the price target from $129 to $130.

While Honeywell has come to be known for its “boring consistency,” the company reported an earnings beat of $0.02 and raised the low end of its guidance range by $0.05 to $6.60-6.70, analyst Nigel Coe noted.

Strategic Path Remains Intact

Honeywell’s long-term strategic path remains “very much intact,” Coe mentioned. He added that while the company continues to deliver weak organic growth, the rate was within the guidance range.

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“The reality is that the ongoing CEO transition and the announced departure of the well respected ACS segment president Alex Ismail (viewed by many as the CEO-in-waiting) provides a narrative of organizational flux,” the Morgan Stanley report noted.

Game Changer?

For those wondering whether the latest quarter was a game changer, Coe answered in the negative. He added, “Elster is meaningfully dilutive and so the +10bps segment margin expansion has to be viewed as very solid given headwinds from aero support payments, currency hedges and BS&D mix.”

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