Pick Up This Overlooked Industrial Growth Play Following an Earnings Selloff

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  • What do you get when a stock beats on its quarterly earnings numbers and when it raises guidance? Typically, you get a rally. But not always. If you get a selloff when that happens, the numbers suggest such a selloff may be temporary.

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  • That could be the case with Honeywell International (HON). The industrial giant has been positioning itself for faster growth and embracing better technology. That allowed it to post better-than-expected earnings on Friday, and raise the full-year 2021 outlook.

    Yet shares sold off. The numbers, while great, were still down compared to the first quarter earnings from a year ago, as many of the company’s industries were hit hard by the pandemic.

    But with a growing suite of technologies for building controls, going far beyond areas like HVAC systems and thermostats that it may be best known for, the company is also getting into software technologies and solutions like monitoring systems.

    Action to take: Despite coming off some negative growth on a year-over-year basis, the company is likely to perform well in the next few years thanks to the company’s investments in better technology and a booming economy.

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  • Shares pay a 1.7 percent dividend yield, and have been growing over the years, so this may be an attractive long-term play for investors.

    For traders, shares are still near all-time highs, and likely to resume their uptrend. The September $260 calls, trading for about $5.60, offer high-double digit return potential in the coming months.

     

    Disclosure: The author of this article has no positions in the stock mentioned here, but may make a trade on this company after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.

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