Wide-Moat Honeywell Expands Its Installed Base With Recent Acquisitions

In our view, Honeywell is one of the stronger multi-industry firms in operation today. Its underlying strategy is similar in each end market: to embed its own products into the operations of customers from which recurring revenue can be generated through aftermarket servicing. We predicate our long-term thesis on secular demand for warehouse automation, remote security management, energy savings in buildings, and the global commercial aerospace recovery. Over the next five years, we think Honeywell is capable of mid-single-digit organic top-line growth, incremental segment operating margins in the high 20s to low 30s, 9%-10% adjusted earnings per share growth, and free cash flow margins in the mid teens.