Cummins Inc. (CMI), Honeywell International Inc. (HON), Illinois Tool Works Inc. (ITW): A Quick Look at the Diversified Machinery Sector

Profit Margin
Gross	28%
Net	10%

The company’s net margin is only 10%, less than Illinois Tool Works Inc. (NYSE:ITW)’ above but still a solid net profit margin for a manufacturing company.

Honeywell International Inc.(NYSE:HON)

Region	Revenue (in $ Million)	Percentage of Total
Europe	9,118	24.21%
Rest of the World	6,168	16.38%
United States	22,379	59.42%
Total	37,665	100.00%

Honeywell International Inc.(NYSE:HON) has the largest exposure to the U.S. market out the three companies in this article. Nearly 60% of Honeywell’s revenue comes from the growing U.S. market and this could offer investors a good play on the recovery. That said, one quarter of Honeywell’s revenue does come from Europe and 16% from the rest of the world — the company does not provide a detailed revenue breakdown.

Profit Margin
Gross	33%
Net	8%

Honeywell has the lowest net margin in the group, indicating that the company is the most inefficient of the lot even though it has the largest exposure to the U.S. market.

Conclusion

So overall, Cummins is on offer right now, despite being sold off recently over worries about changes to emission standards, the company is well placed to take a change in regulation in its stride.

Cummins’ product portfolio and strong historic growth indicates that the company will remain resilient in tough times.

That said, there are also reasons to invest in both Illinois and Honeywell. For example, Illinois is highly cash generative and is buying back stock to improve earnings. Additionally, Illinois has a strong history of uninterrupted dividend payments.

Honeywell could be thought of as the weakest company in this set, with small margins and a high valuation. However, the company does generate the majority of its revenue from the U.S., so it could be a good play on the recovering market.

The article A Quick Look at the Diversified Machinery Sector originally appeared on Fool.com and is written by Rupert Hargreaves.

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