Overall, the performance of HON stock with respect to the index has been quite volatile. Returns for the stock were -2% in 2021, 3% in 2022, and -2% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 — indicating that HON underperformed the S&P in 2021 and 2023.
Honeywell acquired CAES Systems Holdings for $1.9 billion in 2024, bolstering its defense technology solutions offerings.
It also acquired Air Products' liquefied natural gas process technology and equipment business for $1.8 billion in 2024, bolstering Honeywell's energy transition capabilities.
Honeywell International Inc. (Honeywell) is a diversified technology and manufacturing company. It offers aircraft engines, avionics, and other related products and services; control, sensing and security technologies for commercial and residential use; automotive turbochargers, specialty chemicals, electronic and advanced materials; process technology for the refining and petrochemical industry; and heating, ventilation, and air conditioning products and solutions for homes and businesses.
The company has a global presence and generates 40% of its net sales from outside the U.S.
We consider Honeywell's Aircraft Engines, Avionics, Transportation Systems & Others division to be a major source of value for the company because of the following reasons:
Honeywell's high research and development expenditure enables it to consistently introduce new and innovative products for the aerospace industry. Such products help increase efficiency of the aircraft and also make it easier to operate. These products continually see high demand since airline manufacturers prefer to equip their new aircraft and upgrade their old ones with the most advanced engines and equipment.
Honeywell has been a strong player in the commercial aircraft market, supplying major commercial aircraft such as Airbus A320 and Boeing 737 Max. With the commercial aircraft market expected to grow at a steady pace in the next 20 years, Honeywell should be able to derive strong growth from its exposure to this market.
With the grounding of the 737-Max, there was a marginal decline in revenue attained from Boeing in recent years. However, Boeing has now resumed the production of this aircraft.
Airlines are presently involved in expanding their fleet size in order to support the growing demand for air travel. Additionally, airlines are replacing their old aircraft with new ones that are equipped with more advanced technologies and more efficient engines in order to save on fuel costs. Because of these trends, Boeing estimates that around 37,000 new airplanes, amounting to $5 trillion, will be delivered over the next 20 years. This provides a huge opportunity for aircraft parts and engines that are manufactured by Honeywell.
That said, airline orders slowed down considerably due to a slump in the market during the pandemic. However, as seen by the orders placed with Boeing and Airbus, the trend reversal is already here.
The Asia-Pacific region constituted the largest market for HVAC equipment in recent years and is expected to grow at a strong pace, driving the global HVAC market to $277 billion in 2025, compared to $202 billion in 2020. (Link)
Developing markets such as China, India, and Indonesia will be the fastest growing markets in Asia due to the rapid economic growth, greater product availability, and high demand for cooling systems, which will drive sales of HVAC equipment in these countries. While business has slowed down in China, we expect the slump to be temporary.
