Honeywell (NYSE:HON) has been on a post-election roll off late and not even a disappointing 2017 earnings outlook has managed to dampen its enthusiasm. To be honest, I would have bought the dip even with speculative intentions, had it managed to stay that way for a tad longer than it did. I looked at the numbers, and looking at the pre-market felt the stock was being punished excessively much like the reaction to its business update on October 7. At current prices however, I see diminished benefits if any, from accumulating the stock. I would keep my existing holdings for the dividend but wouldn't expect a lot of returns from capital gains.
Benefits from margin improvements are drawing to a close
After its botched attempts to merge with General Electric in the early 2000s, Honeywell has largely been on the right track. It integrated several meaningful acquisitions and by fine-tuning productivity under the Honeywell Operating System, the organization became quite nimble. Due to margin improvements, the company's earnings increased dramatically even as sales grew at a compounded annual growth rate of just ~2% (including acquisitions) since 2006. However, after several years of operating margin improvements, the company's margin base is now quite high. Therefore, upcoming improvements from the rollout of HOS Gold are likely to be slow and marginal.
