Better Buy for 2022: ABB vs. Honeywell              

NYSE: ABB | ABB Ltd  News, Ratings, and Charts

ABB – Increasing investments to enhance productivity and surging demand for advanced and efficient machinery should drive the industrial machinery industry’s growth. Therefore, both ABB (ABB) and Honeywell (HON) should benefit. But which of these stocks is a better buy now? Read more to find out. .

ABB Ltd (ABB) and Honeywell International Inc. (HON) are two prominent players in the industrial machinery space. Switzerland-based ABB manufactures and sells electrification, industrial automation, and robotics and motion products for utilities, industry and transport, and infrastructure customers. It serves automotive, buildings and infrastructure, metals, chemical, data centers, food and beverage, process automation, life sciences, marine and ports, mining, energy, and utility industries. HON is a diversified technology and manufacturing company that provides aerospace products and services, control, sensing, and security technologies for commercial buildings, specialty chemicals, advanced materials, process technology for refining and petrochemicals, and energy-efficient products and solutions.

The industrial sector is going through a tough time due to deepening supply chain disruptions caused by the ongoing Russia-Ukraine war and extended COVID-19 lockdowns in China. However, U.S. industrial production increased 0.9% in March and experts expect the improvement to continue even if at a slower pace. The global industrial machinery market is expected to grow at a 3.5% CAGR by 2027. So, both ABB and HON should benefit.

HON is a winner with marginal gains over the past month versus ABB’s 8.3% loss. But which of these stocks is a better pick now? Let’s find out.

Latest Developments

On April 28, 2022, ABB’s ABB E-mobility announced signing a new global framework agreement with Shell plc (SHEL), a British multinational oil and gas company, to supply ABB’s end-to-end portfolio of AC and DC charging stations. This collaboration will help SHEL address EV charging infrastructure availability by targeting the operation of over 500,000 charge points globally by 2025; and enhance the speed of charging with ABB’s portfolio of charging stations, including its Terra 360 charger.

Click here to check out our Industrial Sector Report for 2022

On May 5, 2022, HON launched two new NIOSH-certified respiratory offerings that expanded its personal protective equipment (PPE) portfolio for healthcare professionals. The company’s DC365 Small Surgical N95 Respirator is designed to protect frontline workers who need a smaller-sized surgical N95. Its new half-mask respirator (RU8500X series) features a filtered exhalation valve and a HEPA P100 filter that allows for high-performing protection (99.9%) and provides source control to the wearer and those around them. These two products should gain widespread recognition across the industry and high demand in the coming months.

Recent Financial Results

ABB’s revenues for its fiscal 2022 first quarter ended March 31, 2022, increased marginally from the prior-year period to $6.97 billion. The company’s gross profit came in at $2.28 billion, indicating a marginal improvement from the year-ago period. Its income from operations came in at $857 million, representing a 7.5% year-over-year improvement. ABB’s net income came in at $604 million, up 20.3% from the prior-year period. Its EPS increased 24% year-over-year to $0.31. The company had $5.22 billion in cash and equivalents as of March 31, 2022.

For its fiscal 2022 first quarter ended March 31, 2022, HON’s net sales decreased yearly to $8.38 billion. The company’s operating income came in at $1.27 billion for the quarter, indicating a 15.8% year-over-year decline. HON’s adjusted net income came in at $1.32 billion, representing a 2.8% decline from the prior-year period. Its adjusted EPS came in at $1.91, indicating a marginal year-over-year decline. As of March 31, 2022, the company had $9.28 billion in cash and cash equivalents.

Past and Expected Financial Performance

Over the past three years, ABB’s revenue, net income, and EPS have increased at CAGRs of 1.1%, 29.6%, and 51.3%, respectively.

ABB’s EPS is expected to increase 8.9% year-over-year in fiscal 2022, ending December 31, 2022, and 15.1% in fiscal 2023. Its revenue is expected to grow 3.4% in fiscal 2022 and 6.8% in fiscal 2023. Analysts expect the company’s EPS to grow at a 14.6% rate per annum over the next five years.

Over the past three years, HON’s revenue, net income, and EPS have decreased at CAGRs of 5.2%, 8%, and 5.9%, respectively.

Analysts expect HON’s EPS to grow 7.9% year-over-year in fiscal 2022, ending December 31, 2022, and 12.2% in fiscal 2023. Its revenue is expected to rise 4.6% year-over-year in fiscal 2022 and 6.6% in fiscal 2023. Analysts expect the company’s EPS to grow at a 10.6% rate per annum over the next five years.

Valuation

In terms of forward EV/Sales, HON is currently trading at 3.94x, 104.2% higher than ABB’s 1.93x. In terms of forward EV/EBITDA, ABB’s 12.61x compares with HON’s 15.50x.

Profitability

ABB’s trailing-12-month revenue is almost 3.8 times HON’s. ABB is also more profitable, with a 32.9% gross profit margin versus HON’s 31.9%.

Furthermore, ABB’s net income margin of 16% compares with HON’s 15.3%.

POWR Ratings

While ABB has an overall B grade, which translates to Strong Buy in our proprietary POWR Ratings system, HON has an overall C grade, equating to Neutral. The POWR Ratings are calculated by considering 118 distinct factors, each weighted to an optimal degree.

Both ABB and HON have a B grade for Quality, consistent with their higher-than-industry profitability ratios. ABB’s 35% trailing-12-month return on common equity (ROE) is 144.6% higher than the 14.3% industry average. HON has a 28.9% trailing-12-month ROE, 102% lower than the 14.3% industry average.

ABB has been graded a C for Value, in sync with its slightly higher-than-industry valuation ratios. ABB’s 1.94x forward EV/Sales is 26.4% higher than the 1.53x industry average. HON’s D grade for Value is in sync with its overvaluations. HON has a 3.94x forward EV/Sales, 156.9% higher than the 1.53x industry average.

Of the 77 stocks in the B-rated Industrial – Machinery industry, ABB is ranked #20, while HON is ranked #45.

Beyond what we have stated above, our POWR Ratings system has graded HON and ABB for Sentiment, Growth, Stability, and Momentum. Get all HON ratings here. Also, click here to see the additional POWR Ratings for ABB.

The Winner

Increased focus on production and rising demand should help prominent industrial machinery companies ABB and HON benefit. However, relatively lower valuations and higher profitability make ABB a better buy here.

Our research shows that the odds of success increase if one bets on stocks with an Overall POWR Ratings of Buy or Strong Buy. Click here to access the top-rated stocks in the Industrial – Machinery industry.


ABB shares were trading at $28.81 per share on Friday afternoon, up $0.66 (+2.34%). Year-to-date, ABB has declined -23.35%, versus a -15.16% rise in the benchmark S&P 500 index during the same period.


About the Author: Sweta Vijayan


Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More...


More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
ABBGet RatingGet RatingGet Rating
HONGet RatingGet RatingGet Rating

Most Popular Stories on StockNews.com


:  |  News, Ratings, and Charts

Should You Be Worried About $200 Oil?

One of the biggest challenges facing the economy is the rising price of oil. Already, it’s starting to eat into consumer spending and exacerbating other inflationary pressures. However, investors should prepare themselves for a world with much higher oil prices. In this article, we will explore some reasons that oil prices could surge even higher and strategies investors can use to profit in this scenario. Read on below to find out more…

:  |  News, Ratings, and Charts

3 Defensive Stocks to Consider Buying During the Market Downturn

The Fed’s aggressive interest rate increases to fight high inflation has raised concerns about a potential recession. During times of market turmoil, companies in defensive sectors will likely perform better than the broader market owing to inelastic demand for their products. Thus, we think it could be profitable now to bet on shares of defensive companies CVS Health (CVS), PepsiCo (PEP), and Albertsons (ACI). Read on.

:  |  News, Ratings, and Charts

5 Beaten-Down Tech Stocks That Are Screaming Buys

Concerns over the hawkish Fed and increasing odds of the economy slipping into recession have caused a broad-based sell-off in the stock markets over the past few weeks. However, this offers entry opportunities in beaten-down tech stocks VMware (VMW), Jabil (JBL), Fujitsu (FJTSY), Semtech (SMTC), and Cirrus Logic (CRUS), which possess solid fundamentals.

:  |  News, Ratings, and Charts

3 High-Quality Dividend Aristocrats to Buy in May

The stock market is experiencing heightened volatility and given the Fed’s aggressive monetary stance to tame inflation, stocks might tumble further in price before hitting a bottom. Hence, we think dividend aristocrats W.W. Grainger (GWW), Target Corp. (TGT), and Cintas Corp. (CTAS) could be quality additions to one’s portfolio now. Read on.

:  |  News, Ratings, and Charts

5 Beaten-Down Tech Stocks That Are Screaming Buys

Concerns over the hawkish Fed and increasing odds of the economy slipping into recession have caused a broad-based sell-off in the stock markets over the past few weeks. However, this offers entry opportunities in beaten-down tech stocks VMware (VMW), Jabil (JBL), Fujitsu (FJTSY), Semtech (SMTC), and Cirrus Logic (CRUS), which possess solid fundamentals.

Read More Stories

More ABB Ltd (ABB) News View All

Event/Date Symbol News Detail Start Price End Price Change POWR Rating
Loading, please wait...
View All ABB News