Honeywell SWOT & PESTLE Analysis

Strengths

1. Strong growth with consistent financial performance: Honeywell has delivered strong financial growth and operational over the last few years. On clocking sales of $39.3 billion the earnings per share grew by 8%, comfortably ahead of its peers. The EPS stood at $6.60 in the year 2016 clocking a growth of 47% over the last five years. The free cash flow for 2016 stood at an impressive $4.4 billion, however it was below the below 100% conversion of net income because of the significant plant and capital investments made by the company. Honeywell also has a strong track record of shareowner return with a payout of $2.66 as annual cash dividend in 2016, a growth of 62% over the last five years. The company also bought back 19.3 million shares for $2.1 billion in 2016.

2. Winning and unmatched technology expertise and infrastructure: Honeywell has enhanced its technological capabilities focusing strongly on research and innovation. It has more than 23,000 engineers worldwide. In the software segment the company has deployed 730 full-time product software engineers in addition to the 11,000 software engineers. Honeywell also has 150 research and engineering facilities, 38000 patents granted or pending. The company’s word class technologists are driving innovations across its business segments such as Aerospace; Home and Building Technologies; Performance Materials and Technologies; and Safety and Productivity Solutions. Honeywell has maintained R&D expense around 5% of sales in the last three years with R&D expenses in 2016 amounting to $2,143 million. Further the company was engaged in customer sponsored (majorly the U.S. government) R&D activities amounting to an additional $967 million in 2016. The company also has made capital expenditures exceeding $1 billion which have been concentrated on expansion of facilities to manufacture Solstice, an innovative low global-warming potential refrigerant product.

3. Strong global capacity: Honeywell has 24% of the sale High growth regions (HGR). Growth in the HGR is built upon experience and proven results in China and India, where their “East-for-East” strategy allows them to locally innovate, design and manufacture products where as “East-to-Rest” strategy that takes these HGR innovations and quickly and efficiently tailors them for other emerging and developed markets.

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Weakness

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Opportunity

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Threat

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Political

1. Participation in policymaking and politico-corporate lobbying: Public policy, governmental regulations and international affairs not only impact technology and defense companies’ shareholder interests but also its abilities to meet customer requirements and develop appropriate solution for them. Honeywell actively participates in public policy dialogues in areas which include - automobile emission reduction policies that facilitate the use of more fuel efficient cars, energy efficient construction and renovation, defense programs that support United States national security, tax, trade and other policies. Honeywell does make any corporate political contributions directly through company funds. However, the company has an approved non-partisan Honeywell International Political Action Committee (HIPAC) which is funded from voluntary and personal donations only without any binding on the employees. These funds may be given candidates for federal office as permissible by law and following appropriate disclosures.

Economic

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Social

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Technological

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Legal

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Environmental

1. Development of environmentally responsible products, services and operations: Focusing on environmental sustainability in its products, services and operations is a key to Honeywell’s ambition to create a positive impact in people’s lives. Further the diversity of product portfolio and markets served by Honeywell, increase the complexity and business risks across the supply chain. The company’s innovation team focuses on building products which not only help customers to be more efficient and productive but also reduce their energy consumption and emissions. Honeywell’s portfolio of products and solutions help organizations analyze and reduce environmental emissions while maintaining operational excellence.

2. Emphasis on sustainable operations: Honeywell strives to achieve sustainability in its internal operations by reducing emissions, saving energy and recycling. Honeywell has set a target to reduce Greenhouse gas emissions by an additional 10% per dollar of revenue by 2019 from their 2013 levels. The company is also pursuing reduction in water usage, LED lighting and waste recycling initiatives. In 2016, Honeywell spent $228 million in initiatives related to known environmental matters.