🔧 Is Honeywell’s Aviation Biz Finally Looking Up?

JPMorgan clients want Bitcoin; Aspen's $11B deal.

Hey Global Investor! Here’s what you need to know before the US markets open.

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🔧 Honeywell: What’s Up Honey?

American technology and manufacturing company Honeywell International Inc. (HON) expects to deliver more business jets over the next decade. Record low aircraft inventories and increased demand point to the business aviation market slowly emerging from Covid-inflicted pain. (Tweet This)

From Generators To Aircrafts

Founded in 1906, Honeywell Heating Specialty Company was set up to manufacture and market Mark Honeywell’s invention – the mercury seal generator. The company merged with its competitor, Minneapolis Heat Regulation Company, 21 years later from those humble beginnings.

This merger resulted in WR Sweatt becoming its first chairman. He and his son Harold led the company for the next 75 years. In 1999, AlliedSignal acquired Honeywell for $14B. Jack Welch tried to take over this merged unit at the turn of the century but couldn’t due to monopoly concerns.

Honeywell now has its operations in 970 sites across 70 countries and has 100K employees on its payroll. The company operates in four distinct businesses – Aerospace, Building Technologies, Performance Materials & Technologies, and Safety & Productivity solutions.

As the pandemic hit in 2020, corporate jets were grounded alongside commercial jets, and the aviation sector went through a gut-churning downturn. As the world opened up, business aviation recovered faster than its commercial counterpart.

Global flight operations data shows the number of flights undertaken by scheduled airlines was down 49% Y-o-Y in 2020, while business flights were down only 24%. Bosses of big companies and the super-rich continued to rely on owning or chartering their small jets.

Jet, Set, Go!

In the first half of 2021, the business-jet sector logged over 100K flights, exceeding June 2019’s tally by 12%. That compares favorably to commercial airlines that came in 40% below pre-pandemic levels during the same time frame. Case in point: Southwest Airlines canceled over 1.8K flights last week owing to staffing and ATC problems.

Aviation is the biggest contributor to Honeywell’s overall topline, accounting for a third of the revenue last year. Thus, any recovery in business aviation will directly benefit Honeywell. As if on cue, the company announced it expects to deliver 7.4K business jets worth $238B from 2022 to 2031.

The scenario is similarly bullish for used business jets. Honeywell expects the demand for used jets to rise to over 6.5K units over the next five years. But with record-low inventory levels, there’s a clamor for new jets to be produced.

Business jet operators expect a 12% Y-o-Y upswing in their used jet purchase plans. Aircraft delivery growth is expected to increase 3%  per year through 2031. In tandem, commercial airplane demand is expected to be worth $7.2T in the next 20 years. Honeywell’s aviation business seems to be primed for busy days ahead, with the overall outlook becoming increasingly promising.

With Honeywell’s shares not doing too much to cheer investors up thus far this year, one can only hope the rest of the year sets the wheels in motion for Honeywell’s share price to take off soon!

Market Reaction
HON ended at $215.29, down 1.11%. Shares are up 3.5% this year.

Company Snapshot 📈

HON $215.29 -2.41 (1.11%)

Analyst Ratings (26 Analysts) BUY 54%  HOLD 38%  SELL 8%

Newsworthy 📰

Done: Emerson to merge software units with AspenTech in $11B deal (AZPN +12.33%)

Admission: Jamie Dimon calls Bitcoin worthless, but concedes clients want it (JPM -2.10%)

Foray: Cleveland-Cliffs to enter scrap business with the acquisition of Ferrous Processing in $775M deal (CLF +4.02%)

Later Today 🕒

  • Fastenal Company Earnings (FAST)
  • Pinnacle Financial Partners Earnings (PNFP)
  • Century Bancorp Inc. Earnings (CNBKA)
  • 7:30 PM IST: Job Openings
  • 8:30 PM IST: Median Expected 3-year Inflation Rate

Today’s Market Terminology: Class A Shares

Class A shares are common stock or the majority of shares issued by a public company. Class A shareholders have more voting rights than owners of other class of shares

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