Gilead Sciences, Inc. (GILD): Bears Are Not Going to Get Honeywell International Inc. (HON) Soon

Saira Malik of TIAA-CREF stated on CNBC that is time to change their portfolio, so Gilead Sciences, Inc. (NASDAQ:GILD) is shorted and Honeywell International Inc. (NYSE:HON) has the best potential for a long. This shift from biotech to tech in any form might imply a desire for stable growth till an opportunity for higher returns appears.

Honeywell International Inc. (NYSE:HON)’s stock price rose about 0.4% on September 11, to almost $95. Year-to-date growth is less than 5%, but it has a stable trend towards the top and one has to consider the fact that earnings per share in this company are about 8% higher, paying $1.38 for the second quarter.

“They also have a great global mix of business, with 23% of sales to Europe and 15% of sales to the Emerging Markets. And we think because of their focus on productivity, they can almost double earnings to $10 a share by 2018,” said Saira Malik.

It’s obvious that Honeywell International Inc. (NYSE:HON) is not the only company striving towards better performance, bigger profits and sweeter life. However, it so happens that the company developed traits allowing it to be more profitable than the market. It has a beta of 1.32, compared to Gilead Sciences, Inc. (NASDAQ:GILD)’s 0.77. Note that, besides the fact that such comparisons are usually trivial to establish a true relationship between prices and returns, a higher beta means also more risk. If Honeywell International Inc. (NYSE:HON) manages to hedge risk in its core businesses, it might enjoy a further bump in valuation.

There are no precise targets regarding the stock price’s whereabouts, but  the general positivism can be sensed. It can be depicted from Honeywell International Inc. (NYSE:HON)’s new guidance estimates, which predict a brighter future for margins, where the Segment Margins are expected to be as high as 17% and the Operating Income Margin might reach 15.6%, while earnings are estimated in the range  from $5.45 to $5.55. The company might also lack a little power in sales, which declined 3% – 4% to $40.2 – $40.4 billion.

Disclosure: none