A Brief Overview of Honeywell Automation and Control Solutions

Honeywell (HON) provides control solutions for various residential and industrial applications through the Honeywell Automation and Control Solutions–ACS unit. This segment contributed 34.5%, 35.9%, and 36.6% to the company’s annual revenues in 2013, 2014, and 2015, respectively. The ACS business is further segmented into two separate divisions: Energy, Safety, and Security (or ESS) and Building Solutions and Distribution (or BSD).

Honeywell (HON) has an expansive product offering under ESS, which includes eye and face protection and protective clothing in Industrial Safety; burglar and fire alarms in Security and Fire; gas and electricity meters under Energy Solutions; and humidity and pressure sensors under Sensing and Control. The Industrial Solutions unit automates the safety and security of residential and industrial buildings and helps make them more productive.

Based on 2016 company estimates, Energy, Safety, and Security sales are likely to hit 72% of total ACS revenues, with the rest going to Building Solutions and Distribution. Total ACS sales are expected to reach $15.3 billion–$15.8 billion, a 16.3%–16.6% growth over the previous fiscal. At $14.1 billion, ACS sales contributed to 36.6% of the total sales in 2015. Its major competitors in the ACS business are Johnson Controls (JCI), Schneider Electric (SBGSY), Siemens AG (SIEGY), and Zebra-Motorola.

The business drivers for the ACS unit are largely tied to trends in the housing industry (XHB). The rebound in the US housing industry (ITB) is likely to be a tailwind for Honeywell (HON) since over half of its ACS revenue comes from the North American region.

The company is also well-positioned to capture rising awareness regarding smart solutions for cities in high-growth regions such as China and India. The company expects to grow from a very low installed base, at twice the GDP growth rates in these regions.