27% profit every 20 days?
This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.
Honeywell International, Inc. (NYSE: HON) is a diversified technology and manufacturing company. Honeywell manufactures aerospace products, control technologies, power generation systems, specialty chemicals, fibers, plastics and electronic materials. The company reported its Q3 2013 earnings on Friday. In part, due to macro economic factors, defense sales for the company were down. The graph below shows recent US military expenditure as a percentage of overall government expenditure.
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Are Honeywell's year-on-year change in revenues and earnings better than those of its peers? Find out with this report!
Honeywell Earnings Analysis
This analysis is peer relative (see the end of this post for the peer list) and is based on Honeywell's performance over the last twelve months (unless stated otherwise). The table below shows the preliminary results along with the recent trend for revenues, net income and returns.
| Quarterly (USD million) | 2013-09-30 | 2013-06-30 | 2013-03-31 | 2012-12-31 | 2012-09-30 |
|---|---|---|---|---|---|
| Revenues | 9,647.0 | 9,697.0 | 9,326.0 | 9,577.0 | 9,344.0 |
| Revenue Growth % | (0.5) | 4.0 | (2.6) | 2.5 | (1.1) |
| Net Income | 990.0 | 1,021.0 | 966.0 | 251.0 | 950.0 |
| Net Income Growth % | (3.0) | 5.7 | 284.9 | (73.6) | 5.3 |
| Net Margin % | 10.3 | 10.5 | 10.4 | 2.6 | 10.2 |
| ROE % (Annualized) | 27.5 | 30.0 | 29.3 | 7.7 | 30.2 |
| ROA % (Annualized) | 9.1 | 9.7 | 9.2 | 2.4 | 9.4 |
Valuation Drivers
Honeywell International Inc.'s current Price/Book of 4.4 is about average in its peer group. The market expects Honeywell to grow at about the same rate as its chosen peers (PE of 20.9 compared to peer average of 17.5) and to maintain the return (ROE of 22.9%) it currently generates which is about the same as its peers.
The company's asset efficiency (asset turns of 0.9x) and net profit margins of 8.4% are both average for its peer group. Honeywell's net margin is its highest relative to the last five years and compares to a low of 5.1% in 2011.
Questions about Honeywell's Long-Term Strategy
It seems as if the market has some questions about the company's long-term strategy. While Honeywell's revenues have grown faster than the peer average (6.9% vs. 4.2% respectively for the past three years), the market gives the stock an about average PE ratio of 20.9.
Honeywell's annualized rate of change in capital (7.6%) over the past three years is more than the peer average of 4.8%. However, this investment level has only generated a peer average return on capital of 12.5% averaged over the same three years. This average return on an above average capital investment suggests the company is overinvesting.
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Earnings Quality
Honeywell's net income margin for the last twelve months is around the peer average (8.4% vs. average of 7.1%). This average margin combined with a level of accruals that is around peer average (2.1% vs. peer average of 2.1%) suggests there possibly isn't too much accrual movement flowing into the company's reported earnings.
Honeywell's accruals over the last twelve months are around zero. This level is also around the peer average suggesting a proper level of reserves.
Trend Charts for Honeywell Earnings Analysis
Peers used for Honeywell Earnings Analysis
Honeywell Earnings Analysis uses the following peer-set: United Technologies Corporation (NYSE: UTX), The Boeing Company (NYSE: BA), Emerson Electric Co. (NYSE: EMR), Lockheed Martin Corporation (NYSE: LMT), Rolls-Royce Holdings plc Sponsored ADR (OTC BB:RYCEY), Safran SA (EURONEXT PARIS:SAF), Raytheon Company (NYSE: RTN), BAE Systems plc Sponsored ADR (OTC BB:BAESY) and Rockwell Collins, Inc. (NYSE: COL).
Are Honeywell's year-on-year change in revenues and earnings better than those of its peers? Find out with this report!
Related articles from our archives:
Leaving on a jet plane? Airbus vs. Boeing
2012 Earnings Analysis: Honeywell International Inc. (NYSE: HON)
2012 Earnings Analysis: Emerson Electric Co. (NYSE: EMR)
2012 Earnings Earnings Analysis Lockheed Martin Corp. (NYSE: LMT)
Also published today: Is the market betting on General Electric? GE Earnings Analysis
27% profit every 20 days?
This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.