Honeywell targets over 30 billion pounds sales by 2018
By Lewis Krauskopf
(Reuters) - Honeywell International Inc on Wednesday set a target of increasing overall company sales to more than $50 billion (£30 billion) by 2018 as it seeks to spend $10 billion on acquisitions and continues to expand profit margins.
Honeywell, the U.S. diversified manufacturer of aerospace parts and climate control and security systems, also said it expects earnings to grow at a double-digit pace in percentage terms over the next five years.
Honeywell, which reported $39.1 billion in sales in 2013, unveiled the new five-year targets ahead of its investor conference in New York.
Shares of Honeywell, which also backed its first-quarter and 2014 forecasts, rose 0.8 percent.
"They laid out a very aggressive plan," said Tim Ghriskey, chief investment officer of Solaris Asset Management. "They're going to make this a bigger company, and they were very optimistic about the long-term growth."
Analysts have been eager to see Honeywell's latest five-year targets after praising the company for reaching its goals with the most recent plan.
Honeywell said it wanted to spend $10 billion on acquisitions that would add about $5 billion to $8 billion in sales over the next five years.
Brian Langenberg, an analyst with Langenberg & Co, noted the $10 billion target for acquisitions was significantly larger than the roughly $4 billion spent in the previous five years.
"That's a big number," Langenberg said. "It does stand out as being a meaningful statement about M&A activity."
Excluding deals, Honeywell still expects sales to increase by $7 billion to $12 billion by 2018, an increase of 4 percent to 6 percent a year on average.
"We expect the market to favourably receive Honeywell's message of continued double-digit EPS growth on mid single-digit organic revenue growth," analysts at William Blair said in a research note.
The company sees profit margins for its business segments increasing to between 18.5 percent to 20 percent over that time, up from 16.3 percent last year.
Honeywell expects to generate roughly $30 billion to $33 billion in cash flow from operations through 2018, about half of which it will return to shareholders through dividends and buying back shares.
It expects to invest about $5 billion in capital expenditures, such as increasing production capacity to support its performance materials and technologies business, products which include chemicals used in oil and gas production.
Honeywell shares rose 0.8 percent to $95.39 in premarket trading. Through Tuesday, Honeywell shares had risen 3.5 percent this year, better than a 1.4 percent increase for the S&P 500 index <.SPX>.
(Reporting by Lewis Krauskopf; Editing by Jeffrey Benkoe and Sofina Mirza-Reid)
