Honeywell Sitting At An Attractive Entry Point After Recent Selloff

Argus sees the recent selloff in Honeywell International Inc. HON shares as a buying opportunity. The firm believes Honeywell is set to generate low double-digit earnings growth over the next five years.

Over the past quarter, shares of Honeywell have underperformed the S&P 500, declining 5.6 percent while the S&P 500 has eased 1.6 percent.

“We believe that Honeywell will continue to benefit from its diverse product lines and relatively low exposure to U.S. defense spending, as well as from its strong presence in the commercial aerospace and construction markets,” analyst John Eade wrote in a note.

Eade noted that growing demand for fuel efficiency should boost fast-growing Turbo motors segment unit, while the company’s “mid-market” product sales in China is growing despite the infrastructure slowdown.

The analyst, who has a Buy rating on the stock, also pointed out Honeywell’s strong balance sheet and management has a history of growing earnings and hiking the dividend.

Eade projects 2016 EPS of $6.63, implying 9 percent growth for the year. The analyst also maintained his 2017 forecast of $7.29. Management continues to full-year expect EPS of $6.60-$6.64, implying growth of 8-9 percent. For the fourth quarter, it projects EPS of $1.74-$1.78, implying growth of 10-13 percent.

“Our blended analysis indicates a fair value for HON of $130 per share,” Eade added.