Honeywell: Perhaps a Multi-Year Buy Under $30

Submitted By Ned Douthat

According to CNBC’s Jim Cramer, Honeywell (HON) is a screaming buy when it dips below $30. The diversified technology and manufacturing company reported earnings last week that were not overly impressive as management ratcheted down guidance, but this does not scare away Cramer.

“… I think HON is a solid, perhaps multiyear buy under 30 yielding 4%. You listen to me, peter, listen to me all of new jersey. Right now I think pull the trigger. >> buy, buy, buy — >> I say you won’t regret it. Honeywell is a winner. Like to end the lightning round on a positive note and it’s H-O-N and the lightning round is what’s on the minds let’s ask. …” CNBC’s Mad Money on Tuesday, April 28, 2009

Last week we wrote about how Honeywell actually reported what was, in our eyes, a better quarter the 3M (MMM) but the tone of the conference calls of the two firms would have made you think that they opposite were true (Underestimating the Economy Hurts Honeywell). 3M’s CEO focused on the positives, most importantly that he sees the broad economic recovering in the next three to six months. Meanwhile, Honeywell’s CEO was very apologetic for having to lower guidance and he reaffirmed his commitment to never have to do that again.

We have to agree with Cramer’s assessment on HON as we have a current valuation of Undervalued. This seems to be the wonderful example of a company that has been brutally beaten down in the market, far worse than seems warranted by the slight declines in fundamentals. The company is down about 50% in the last year, while earnings have dropped off less than half that much and revenue is only supposed to be down 10% in 2009. The company is trading at just above 10 times 2009 earnings. The stock is getting a little bit of a “Cramer bounce” Wednesday morning, but at just over $30, we still see a lot of upside in Honeywell.