NEW YORK — Honeywell Int’l is aiming to increase overall company sales to more than $50 billion by 2018 and expects spend $10 billion on acquisitions as it moves to expand profit margins, the company announced on Wednesday during an investor conference here.
Honeywell, the Morris Township, N.J.-based manufacturer of aerospace parts, climate control systems, and security and fire/life-safety systems, also said it expects earnings to grow at a double-digit pace in percentage terms over the next five years.
Honeywell reported $39.1 billion in sales in 2013. Analysts have been eager to see the company’s latest five-year targets after praising the company for reaching its goals with the most recent plan, according to Reuters. Since the company issued five-year targets in February 2010, its shares have outperformed those of conglomerate rivals such as General Electric and United Technologies Corp. and the broader market.
“Most investors would consider Honeywell a winner out of the last five years or so,” Morningstar analyst Daniel Holland told Reuters. “The company operationally looks a lot better than it did.”
During the investor conference, CEO Dave Cote said Honeywell’s businesses aligned well with global trends such as increasing demand for energy efficiency and growing urbanization. The company expects high-growth regions such as China to drive about half its sales growth over the next five years.
“We have a real diversity of opportunity ... so that we can grow almost in any environment,” Cote told the conference.
Cote said Honeywell wants to spend $10 billion on acquisitions that would add about $5 billion to $8 billion in sales over the next five years. He said Honeywell would be “careful” with its deal selection, laying out criteria for deals such as a level of cost savings. “That being said, I think there’s a lot of a possibility out there for us,” he said.
Lourdes Peña, manager, Honeywell ACS Communications, tells SSI that strategic acquisitions will continue to be a part of the growth strategy across all Honeywell businesses.
“The Honeywell growth strategy — including our security and life-safety businesses — is multifacetted and also focuses on investments in R&D, Velocity Product Development and the Honeywell User Experience,” she said. “Our focus is to get products to market faster, simplify how people interact with our products and make the jobs of installers and end users easier. That’s the way we continue to deliver value.”
Excluding M&A activity, Honeywell still anticipates sales to increase by $7 billion to $12 billion by 2018, an increase of 4% to 6% per year on average. The company projects profit margins for its business segments increasing to between 18.5% to 20% in that timeframe, an increase from 16.3% last year.
Honeywell expects to generate roughly $30 billion to $33 billion in cash flow from operations through 2018, about half of which it will return to shareholders through dividends and buying back shares.
It expects to invest about $5 billion in capital expenditures, such as increasing production capacity to support its performance materials and technologies business, products which include chemicals used in oil and gas production.
Honeywell shares rose nearly 1% to $95.50 in Wednesday morning trading on the New York Stock Exchange.