Honeywell Comes Through On Margins, But Growth Lagged A Bit

I have to admit that Honeywell's (HON) lackluster share price performance over the past three months has surprised me, as I expected this well-loved multi-industrial to benefit from some "safe haven" investment flows as the data on a broader industrial slowdown continued to accumulate. Whether I underestimated how much of that had already taken place, or whether investors were a little put off by valuation, I don't know, but Honeywell has lagged its industrial peers a bit since the second quarter earnings update, though the company is still among the outperformers of the past year.

There wasn't really anything in Honeywell's third quarter that changes my view. The company's longer-cycle process businesses are holding up and aerospace should remain strong for some time. Weakness in productivity/automation should be transitory, and the company continues to do well on margins. Healthy mid-single-digit long-term FCF growth and strong margins/ROIC/ROA support a robust valuation for Honeywell shares, but I can't call these shares undervalued today.

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Honeywell Comes Through On Margins, But Growth Lagged A Bit