UPDATE 3-Honeywell targets over $50 bln sales by 2018, M&A ramp-up
By Lewis Krauskopf March 5 (Reuters) - Honeywell International Inc on Wednesday set a target of increasing overall company sales to more than $50 billion by 2018 as it seeks to spend $10 billion on acquisitions and continue to expand profit margins. Honeywell, a U.S. diversified manufacturer of aerospace parts and climate control and security systems, also said it expects earnings to grow at a double-digit pace in percentage terms over the next five years. Honeywell, which reported $39.1 billion in sales in 2013, unveiled the new five-year targets as it hosted an investor conference in New York. Shares of Honeywell, which also backed its first-quarter and 2014 forecasts, rose about 1 percent. "They laid out a very aggressive plan," said Tim Ghriskey, chief investment officer of Solaris Asset Management. "They're going to make this a bigger company, and they were very optimistic about the long-term growth." Analysts have been eager to see Honeywell's latest five-year targets after praising the company for reaching its goals with the most recent plan. Since the company issued five-year targets in February 2010, its shares have outperformed those of conglomerate rivals such as General Electric Co 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 said. "The company operationally looks a lot better than it did." Speaking at the investor conference, Chief Executive Officer Dave Cote said Honeywell's businesses aligned well with global trends such as increasing demand for energy efficiency and growing urbanization. Honeywell 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. Honeywell said it wanted to spend $10 billion on acquisitions that would add about $5 billion to $8 billion in sales over the next five years. Brian Langenberg, an analyst with Langenberg & Co, noted the $10 billion target for acquisitions was significantly larger than the roughly $4 billion spent in the previous five years. "That's a big number," Langenberg said. "It does stand out as being a meaningful statement about M&A activity." Cote 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 possibilities out there for us," he said. Excluding deals, Honeywell still expects sales to increase by $7 billion to $12 billion by 2018, an increase of 4 percent to 6 percent a year on average. "We expect the market to favorably receive Honeywell's message of continued double-digit EPS growth on mid single-digit organic revenue growth," analysts at William Blair said in a research note. The company sees profit margins for its business segments increasing to between 18.5 percent to 20 percent over that time, up from 16.3 percent 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 percent to $95.50 in morning trading on the New York Stock Exchange. Through Tuesday, Honeywell shares had risen 3.5 percent this year, better than a 1.4 percent increase for the S&P 500 index.