Honeywell Lifts Outlook
Mary is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Recently there has been concern and talk of the defense sector drying up due to the coming November elections. True to form, defense spending is seen to slow as it gets closer to election time. Understandably, the sector is nervous about the policies of the new administration. Government spending and policies are a major part of this sector. However, even with tensions running high, Honeywell (NYSE: HON) recently lifted its outlook for the year. The company added 5 cents to its 2012 earnings outlook, putting together a new estimate of $4.40 to $4.55 per share. The company cited continued investment in new products, technologies, and initiatives as reasons for the change. In addition to this lifted outlook, Honeywell also posted an 11% higher second quarter profit in its earnings report.
In addition to aerospace and defense, Honeywell provides products and services in energy, safety, and security. Honeywell’s diversification might be the reason for its continued success in election season. Some of its top competitors include Lockheed Martin (NYSE: LMT) and Northrop Grumman (NYSE: NOC). Lockheed Martin is a global security and aerospace company principally engaged in the research, design, development, manufacture, integration, and sustainment of advanced technology systems, products, and services. The majority of the company’s business is with the U.S. Department of Defense and other federal government agencies. The remaining portion of their business is comprised of international governments and some commercial customers as well. Lockheed relies heavily on the U.S. Government to maintain their standing in the industry. Election season should prove tough for this company, but may provide a good chance for the savvy investor to buy in.
Northrop Grumman is a leading global security company providing innovative systems, products, and solutions in aerospace, electronics, information systems, and technical services to government and commercial customers worldwide. Similar to Lockheed Martin, the U.S. Government is also one of Grumman’s largest contracts. Grumman is a leader in key areas such as unmanned systems, cyber security, and logistics that are critical to the defense of the nation and its allies. Though the majority of their offices are in the U.S., they do have a U.K. branch as well.
Both Lockheed and Grumman are smaller than Honeywell in terms of market capitalization. However, Honeywell is also the more diversified of the three and is not as reliant on a single customer. This may give Honeywell the advantage in election season, but at the same time it may provide a great opportunity for investors to get in on Lockheed and Grumman while defense spending remains slowed. This slow spending will surely drive down share prices, making them a great value.
MaryPosey has no positions in the stocks mentioned above. The Motley Fool owns shares of Lockheed Martin and Northrop Grumman. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.