Please ensure Javascript is enabled for purposes of website accessibility

Here's Why Honeywell Lost 13.8% in 2018

By Lou Whiteman – Updated Apr 15, 2019 at 9:49PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Worries about a global slowdown have discounted shares of a company that expects growth in a number of key areas.

What happened

Shares of Honeywell International (HON 0.52%) were cruising along nicely in 2018, up more than 8% year to date in early October, before crashing back to earth and finishing down 13.8% for the year, according to data provided by S&P Global Market Intelligence. For patient investors, the drop could be an enticing buying opportunity.

Check out the latest Honeywell earnings call transcript.

So what

Honeywell's October swoon corresponded with double-digit declines for peers like United Technologies and General Electric, and seemed to be driven more by concerns about a potential Chinese or global slowdown than it was based on anything company-specific. Indeed, Honeywell's third-quarter results, announced mid-month, were strong, and the company raised its full-year earnings guidance.

HON Chart

HON 2018 price movement data by YCharts.

Before year's end, Honeywell completed the spinouts of its auto-turbocharger business Garrett Motion and its Resideo Technologies home-products business, leaving it focused on areas such as aerospace and warehouse automation that appear poised for higher growth. CEO Darius Adamczyk, who called his stock a "steal" earlier in the year when it was trading much higher than at current prices, said the aerospace arm is in growth mode, and the company expects 10% growth in its safety and productivity solutions unit.

Now what

For the foreseeable future, Honeywell shares will likely be influenced by headlines about trade wars, and investors will continue to look for signs of economic growth (or weakness) in China. So it's difficult to predict what direction the shares will take in the months to come.

Logo outside Honeywell office

Image source: Honeywell.

But regardless of stock movement, this is a solid company entering a period of enhanced growth; in October, Honeywell forecast free cash flow conversion of around 100% in 2019, and a $600 million improvement to working capital. Honeywell also has ample balance-sheet power to do an opportunistic acquisition if it sees anything appealing.

Back in October, with Honeywell trading at around $165 per share, I described the shares as "not cheap" but still called the company "one of the more attractive large industrials to buy today." Off $30 per share since then, Honeywell looks like a solid buy.

Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Honeywell International Stock Quote
Honeywell International
HON
$220.05 (0.52%) $1.14

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
356%
 
S&P 500 Returns
118%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/27/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.