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The strongest driver of Honeywell International Inc.’s HON business at the moment is strength in its commercial aviation business within the Aerospace Technologies segment. In the third quarter of 2024, its commercial aviation aftermarket sales increased 8% year over year, driven by solid demand in the air transport and business aviation markets. Also, solid momentum in the commercial aviation original equipment business, backed by an improvement in build rates and an increase in air transport hours, has been favorable. In the third quarter, sales from this business grew 10% year over year.
For 2024, it expects organic sales in the Aerospace Technologies segment to be up in low double digits with double-digit growth in both commercial aviation and defense and space businesses. However, as part of its business portfolio transformation strategy, the company is considering selling its Aerospace business. It will provide an update on the same when it reports its fourth-quarter 2024 earnings.
The company intends to strengthen and expand its businesses through acquisitions. In October 2024, it acquired Civitanavi Systems S.p.A. for about €200 million ($217 million) to boost its portfolio of aerospace navigation solutions. Also, in September, it acquired CAES Systems from private equity firm Advent. The transaction will augment its defense technology offerings across various domains, including land, sea, air and space.
Apart from this, in June, it acquired Carrier’s Global Access Solutions business for an all-cash deal of $4.95 billion. This acquisition will position HON to become a leading provider of security solutions for the digital age. Acquisitions had a contribution of 2.1% to the company’s sales in the third quarter.
HON remains focused on rewarding its shareholders through dividend payouts and share repurchases. In the first nine months of 2024, it paid out dividends of $2.16 billion and repurchased shares worth $1.2 billion. It also hiked the quarterly dividend rate by 5% in September 2024.
HON’s Price Performance
Image Source: Zacks Investment Research
In the past three months, this Zacks Rank #3 (Hold) company’s shares have gained 11.3% against the industry’s 13.2% decline.
However, HON has been witnessing weakness in the warehouse and workflow solutions businesses due to lower demand for projects, which has been affecting the Industrial Automation segment's performance. Also, the weakened demand for its products and solutions within the sensing and safety technologies business is worrisome. Continued softness in the warehouse automation business owing to lower investments in the market, remains a concern for the segment. For 2024, it anticipates that the Industrial Automation segment’s organic sales will decline in the high-single digits.
The company has also been dealing with the adverse impacts of the high cost of sales and operating expenses. In the first nine months of the year, its cost of sales rose 3.7% year over year to $17.4 billion, while selling, general and administrative expenses increased 6% to $4.1 billion. The company incurred high costs and expenses related to investment in digital infrastructure and business integration activities.