Dow stock Honeywell was one of the biggest drags on the 30-stock average Thursday after Club industrial giant reported mixed third-quarter results compounded by a mixed outlook. Revenue for the three months ended Sept. 30 rose 5.6% year-over-year to $9.73 billion but short of the LSEG compiled consensus estimate of $9.9 billion. Adjusted earnings per share increased 8.4% to $2.58 and beat the $2.50 consensus forecast. EPS was also above the high-end of management’s previously provided guidance. HON YTD mountain Honeywell YTD Honeywell shares sinking 4.5% after the release was understandable but represents an opportunity. That’s because we’re encouraged by the setup into 2025. Thursday’s pullback is buyable — and therefore, we’re reiterating our 1 rating and $235 per share price target. Bottom line While third-quarter sales missed, strong execution and a focus on cost discipline by management led to better-than-expected profitability. Cash flow generation was also a bright spot. We believe the team, under new CEO Vimal Kapur, is positioning Honeywell for future success despite some setbacks. Delays in project-led businesses, little progress in the short-cycle recovery, and supply chain disruptions forced management to adjust their outlook for the remainder of the year. A short business cycle means a quick turnaround from order to delivery. The ability to place an order and take delivery quickly makes short-cycle businesses more sensitive to the economy. Honeywell Why we own it: Honeywell is a provider of industrial technology solutions to companies in various industries. We appreciate its exposure to the aerospace industry as a parts supplier. The portfolio has, however, become a bit bloated. We think further upside will come as the company divests non-core businesses and focuses both internal investments and acquisition efforts around management’s three targeted mega-trends: automation, the future of aviation, and the energy transition. Competitors: Emerson Electric , RTX , 3M Weight in portfolio: 3.14% Most recent buy: April 10, 2024 Initiated: July 5, 2020 Honeywell has proven to be a frustrating holding. Every time the stock looks like it may be on the verge of a real breakout, we get some reason for it to sell off. That said, we have been seeing a series of higher lows over the past year — likely in acknowledgment that the business is becoming stronger as the portfolio is revamped even in a tough operating environment. Commentary While still looking for a short-cycle business rebound to take hold and orders to materialize in the future, some of the Q3 disappointment is the result of things being pushed out. Honeywell did, however, realize a book-to-bill ratio of 1.1 times thanks to a 2% organic increase in orders. As a result, the company exited the third quarter with another record backlog of $34 billion, a 10% increase from a year ago. On the post-earnings conference call, Kapur highlighted the company’s closing of four major…
Read More: What to do with Honeywell stock after its sharp post-earnings pullback