Option Trade 
Honeywell International Inc. (NYSE:HON) Calls 
Tuesday, April 14, 2015

**OPTION TRADE: Buy the HON Jun 2015 105.000 call (HON150619C00105000) at or under $2.00. Place a protective stop loss at $0.80, and a pre-determined sell at $3.50.

by Ian Harvey

April 14, 2015

Introduction

Honeywell International Inc. (NYSE: HON), a diversified technology and manufacturing company, is scheduled to report its first-quarter earnings Friday morning. The consensus estimates are for $1.39 in EPS and revenue of $9.49 billion.

Honeywell International has had a good run over the past two years. The stock price is up more than 55%, but most of that growth came in the 12 months ending in December of 2013. So far this year, shares are up 5% but look to be extending that margin.

Honeywell International Inc. is expanding with new ideas, and the latest comes with an announcement that its Global Tracking solution has passed the final acceptance test for use on the European Space Agency’s (ESA) Galileo search and rescue program by demonstrating dramatically reduced emergency response times. Galileo is a pan-European geo-positioning satellite system operated by the ESA and funded by the European Union.

Also, another step forward by Honeywell is the news that Hisense, a leading Chinese appliance manufacturer, will begin using Honeywell’s low-global-warming-potential insulation materials in its refrigerators and freezers. “As a technology-based company, it’s our goal to prepare the next generation of engineers, scientists and innovators, but to do that, you have to capture a student’s interest,” said Mike Bennett, president, Honeywell Hometown Solutions, the company’s global corporate citizenship initiative.

Technical Details

Honeywell’s share price was at $103.28 at yesterday’s close and iscurrently valued at $81.94 billion. The 12-months range for the stock is $82.89 – $106.15. The rising volatility in the last session also led to a sharp increase in volume which was recorded at 2,107,757 shares. The previous session of the stock had ended at $104.39. The company has 780,629,000 shares in free circulation.

Honeywell International Inc. has a price to earnings ratio of 19.64 versus S&P 500 average of 18.51. HON stock price has outperformed the S&P 500 by 3.2%.

The stock has a 50-day moving average of $103.44 and a 200-day moving average of $98.75.

Earnings

Honeywell International last released its earnings data on Friday, January 23rd. The company reported $1.43 earnings per share (EPS) for the quarter, beating the consensus estimate of $1.42 by $0.01. The company had revenue of $10.30 billion for the quarter, compared to the consensus estimate of $10.23 billion.

During the same quarter in the previous year, the company posted $1.24 earnings per share. The company’s revenue for the quarter was down 1.2% on a year-over-year basis. Analysts expect that Honeywell International will post $6.10 EPS for the current fiscal year.

Analysts Opinions

In a research note published on Wednesday, 1st April, Nomura Securities initiated coverage on Honeywell International Inc. stock with a Neutral rating and a price objective of $103.

Nomura Securities research analyst, Jonathan Wright, firmly believes that Honeywell has many positive things to offer to its existing and potential investors, starting with a brilliant track record of operational execution, along with long-term drivers of growth that will help increase margins, earnings, and revenue.

The excess cash in hand make Honeywell’s balance sheet an attractive benchmark for the investors and for the company itself.

Zacks reissued their hold rating on shares of Honeywell International in a research report sent to investors on Monday morning, 30th March.

Zacks’ analyst wrote,

“Honeywell reported year-over-year increase in adjusted earnings in fourth quarter 2014, beating the Zacks Consensus Estimate by $0.01. With a diversified business portfolio that mitigates operating risks, Honeywell has the potential to earn consistent above-average returns in the long term. The company has a flexible yet disciplined focus on cost and productivity, and maintains a conservative balance sheet. Honeywell also continues to benefit from investments in new products and services. However, adverse foreign currency translations and volatility in commodity prices are likely to peg back its growth momentum to some extent. A change in the U.S. government’s defense and aerospace funding could also adversely impact sales of Aerospace’s defense and space-related products and services.”

Also, Honeywell International has been given an “A” credit rating by analysts at Morningstar. The research firm’s “A” rating suggests that the company is a low default risk. They also gave the stock a three star rating.

The company has also been the subject of a number of other research reports:-

• Analysts at Nomura initiated coverage on shares of Honeywell International in a research note on Tuesday, March 31st. They set a “neutral” rating and a $103.00 price target on the stock.

• Analysts at Argus raised their price target on shares of Honeywell International from $106.00 to $115.00 and gave the company a “buy” rating in a research note on Tuesday, January 27th.

• Finally, analysts at JPMorgan Chase & Co. lowered their price target on shares of Honeywell International from $105.00 to $101.00 and set an “overweight” rating on the stock in a research note on Thursday, January 15th.

There are currently twenty-four analysts that cover HON stock. Of those twenty-four, seventeen have a Buy rating, seven have a Hold rating. On a consensus basis this yields to an Overweight rating. The consensus target price stands at $112.71.

Conclusion

Honeywell International Inc.’s stock price is expected to reach $ 111.64 in the short term. The number of analysts agreeing with this consensus is 14. The higher estimate for the short term price target is at $121 while the lower estimate is at $98. The standard deviation of the price stands at $6.76.

Therefore, based on the facts above the following options trade is recommended…..


**OPTION TRADE: Buy the HON Jun 2015 105.000 call (HON150619C00105000) at or under $2.00. Place a protective stop loss at $0.80, and a pre-determined sell at $3.50.



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