Honeywell International Inc. (HON:US)’s $600 million purchase of Intermec Inc. (IN:US), which bolsters mobile- computing revenue and adds voice and bar-code technologies, may pay off for investors in 2014 after tempering profit next year.
Honeywell, a maker of flight controls and thermostats, said today it agreed to buy Intermec for $10 a share in cash. The transaction, which will make Intermec a part of Honeywell’s automation and control solutions business, will trim profit by 3 cents or 4 cents a share to a $4.75 to $4.95 a share in 2013, the company said.
The top of the forecast range, excluding the deal, is $4.99, surpassing the average analyst estimate of $4.95, while the midpoint trails that figure, according to data compiled by Bloomberg.
Buying Intermec “is exactly the kind of thing that you want management to do,” Steven Winoker, a New York-based analyst at Sanford C. Bernstein & Co., said in a telephone interview. “You shouldn’t be worried about something that’s earnings dilutive when it’s value creative.”
Honeywell fell 0.2 percent to $61.86 in New York. The stock previously gained (HON:US) 14 percent this year, outpacing a 13 percent increase by the Standard & Poor’s 500 Index.
Intermec, a provider of radio frequency-identification products, has 2,200 employees in more than 65 offices worldwide.
Acquiring it “expands our product offerings and strengthens our intellectual property portfolio,” strengthening Honeywell’s position in the automatic identification and data capture industry, said Roger Fradin, chief of the automation and controls business.
Honeywell has a demonstrated ability to bolster performance through acquisitions, Winoker and Howard Rubel, a New York-based analyst at Jefferies Group Inc., said in a phone interview. Rubel has a buy rating on Honeywell stock, and Winoker rates it outperform.
“If you’re going to worry about 3 cents your whole life, you’re going to spend your time looking at the ground trying to find those pennies,” Rubel said in a telephone interview. “The trend is generally in the right direction and given a world where it’s been hard to do as well as they’ve done, I think they’ve accomplished a lot.”
Honeywell, which also predicted (HON:US) today that sales would grow as much as 5 percent next year to $39.5 billion, is facing recessions in Europe and lower demand for short-cycle products in China. Along with industrial peers General Electric Co. and Parker Hannifin Corp. (PH:US), Honeywell had cut forecasts for the year in October.
“While we’re planning for a continued slow-growth macro environment in 2013, we will remain flexible and adhere to our disciplined focus on growth, efficiency and competitiveness, driving sales and margins higher,” Chairman and Chief Executive Officer Dave Cote said in the statement.
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