Honeywell (HON) To Benefit From Rise In Helicopter Demand

Honeywell International Inc. (NYSE:HON) forecasts new civilian-use single engine helicopter shipments of 4,000 to 4,200 over the next five years on the back of strong global economic conditions, potential positive impact of the U.S. tax reform and lower volatility in oil and gas-related markets. The forecast is in line with its earlier five-year forecast done in 2017.

Honeywell’s Aerospace unit anticipates 5.3% to 10.5% rise in helicopter shipments till 2022 compared with 3,800 deliveries made between 2013 and 2017. Helicopter sales had reached its peak at $6.1 billion in 2013 amid a frenzy of drilling activities. Crude along with other commodities began to weaken in the second half of 2014 after soaring to more than $100 a barrel. Oil prices plummeted to below $30 a barrel in 2016. Helicopter sales are likely to climb for the second year after hitting a low in 2016. Also, Honeywell has reorganized its operating segments by merging Transportation Systems segment with the Aerospace segment to leverage on the shared business models and the engineering and technology similarities.

The company expects helicopter fleet utilization to increase significantly in North America with a modest increase in Europe and Latin America over the next 12 months. It expects a stability in purchase-plan rates for civil helicopters in North America, Europe and Asia which is consistent with its 2017 survey. The company hints that the light single-engine helicopter models will be the most-desired product over the years as flying taxis are being contemplated as an urban commute by tech startups and companies.

Share Price Movement

Honeywell shares gained 0.9% following the news and the trend is expected to continue. The stock has outperformed the industry in the last three months with an average gain of 2.4% against a decline of 1.5% for the latter.



Zacks Rank and Key Picks

Honeywell carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the industry are Federal Signal Corporation (NYSE:FSS) , Raven Industries, Inc. (NASDAQ:RAVN) and 3M Company (NYSE:MMM) . While Federal Signal and Raven Industries sport a Zacks Rank #1 (Strong Buy), 3M has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Federal Signal exceeded estimates in the trailing four quarters with an average of 11.5%.

Raven Industries has an expected long-term earnings growth rate of 10%. It surpassed estimates in each of the trailing four quarters with an average beat of 25.8%.

3M has an expected long-term earnings growth rate of 10.2%. It trumped estimates in three of the trailing four quarters, the average being 3.2%.

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3M Company (MMM): Free Stock Analysis Report

Honeywell International Inc. (HON): Free Stock Analysis Report

Raven Industries, Inc. (RAVN): Free Stock Analysis Report

Federal Signal Corporation (FSS): Free Stock Analysis Report

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