Two businesses that appeal to long-term investors are Honeywell International (HON -1.25%) and ABB (ABB -1.82%). Both firms have management teams that have the capacity and dedication to produce considerable value for investors over an extended period of time. Additionally, they already have initiatives in place that will boost profits significantly.
1. Honeywell International
Not all mature industrial conglomerates are dull, slow-growing businesses. For instance, Honeywell is bursting at the seams with expansion plans that management refers to as its “breakthrough projects.” They consist of Honeywell’s software division, Honeywell Connected Enterprise, which clients may utilize to digitally change their companies. Examples include developing meaningful insights from a large amount of data collected by wirelessly connected sensors to improve the operation of a building’s systems.
Honeywell owns a controlling stake in Quantinuum, a fast-growing quantum computing business, and the management expects $2 billion in yearly revenues by 2026. Avionics and propulsion systems for unmanned cargo aircraft and air taxis are produced by Honeywell Unmanned Aerial Systems and Unmanned Aerial Mobility. The business and Archer Aviation recently signed a contract for the company to install technology on Archer’s planes. Last but not least, its Sustainable Technologies Solutions (STS) is a pioneer in sophisticated plastics recycling, energy storage technology, and renewable fuels. According to management projections, STS’s revenue will increase from $200 million in 2021 to $700 million in 2024.
Due to these growth measures, management revised its projection for long-term annual growth early this year from a target of 3%-5% to 4%-7%. With a forward price-to-earnings ratio of 18, Honeywell is now a great value given its growth potential.
Although this European industrial behemoth hasn’t always been the best-run organization in the industry, it has always possessed an intriguing mix of companies. For instance, it is a global leader in discrete (or industrial) automation and process automation and has one of the top robotics firms in the world (the processing of raw materials). All of these are expanding industries in the new economy, which places a strong emphasis on automated manufacturing and the application of digital technology to enhance operational efficiency.
Automation has become more desirable due to advances in digital technology, and as automation usage rises, so does interest in digital technology, which helps ABB. ABB is also well-positioned to benefit from the continuous trend toward electrification thanks to its electrification solutions, which include an EV charging company.
Since taking over in 2020, CEO Bjorn Rosengren has placed ABB on a road to maximizing its value through restructuring. ABB has historically had successful companies. Combining operational reform (eliminating ABB’s previous matrix structure), divesting non-core operations, and a focus on boosting margins are the key components of this strategy. If Rosengren is successful in achieving this goal, the stock has a significant upside potential. ABB is a desirable investment since it is trading at less than 16 times Wall Street analysts’ projected profits for 2023 and has much room for future development.