At The Motley Fool, we poke plenty of fun at Wall Street analysts and their endless cycle of upgrades, downgrades, and "initiating coverage at neutral." While the pinstripe-and-wingtip crowd is entitled to its opinions, we've got some pretty sharp stock pickers down here on Main Street, too. And we're not always impressed with how Wall Street does its job.
So perhaps we shouldn't be giving virtual ink to "news" of analyst upgrades and downgrades. And we wouldn't -- if that were all we were doing. Fortunately, in "This Just In," we don't simply tell you what the analysts said. We also show you whether they know what they're talking about.
"Honey" pie, you are making me crazy ...
Wall Street is in love with Honeywell
Why? For several reasons, actually. Citi praises "Honeywell's execution and its exposure to megatrend catalysts in energy efficiency across nearly all of its businesses." The banker sees a potential for cost savings in Europe to bolster profit margins, even if revenues decline next year. And noting the surprising strength in aircraft sales at Airbus and Boeing
Of course, while it's true that Honeywell gets more revenues from aerospace than does the 800-pound gorilla of this industry, General Electric
And on this point, at least, I agree wholeheartedly with Citi.
Why do I say this? Because the numbers just make sense. I mean, sure, one can argue that Honeywell seems pricey at 15.2 times earnings. Aerospace peers Boeing, Lockheed Martin
Most analysts expect to grow earnings at 16% per year over the next five years. When you consider that Honeywell has hedged its bets well in the airliner wars, winning contracts to supply key systems aboard both Boeing's fast-selling 787 Dreamliner and its uber-successful 737 line of aircraft, and aboard Airbus's A320neo challenger as well, I'd say that the growth rate analysts are projecting should be achievable.
And if you assume the 16% growth rate as fact, and then factor in Honeywell's healthy 2.8% dividend yield, I'd argue that the stock looks cheap at 15 times earnings.
Long story short, Citi's picked another winner this week. And investors at today's prices are getting a "Honey" of a deal.
Looking for even better sweet deals in the stock market? Satisfy your craving for bargains: Read the Fool's new -- and free! -- report on The Motley Fool's Top Stock for 2011.
Fool contributor Rich Smith owns no shares of any company named above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 346 out of more than 180,000 members.
The Motley Fool owns shares of Lockheed Martin. Motley Fool newsletter services have recommended buying shares of Emerson Electric. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.