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Industrial and aerospace heavyweight Honeywell $HON reported better than expected earnings on Friday before the market opened . Aerospace business, warehouse automation business and momentum in Homes and ADI global distribution all contributed. 

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Honeywell International Inc. NYSE: HON Earnings Beat  Before Open Friday

$2.03 Beat $1.99 EPS AND $10.76 Billion Beat $10.75 Billion Forecast in Revenue 

Earnings

Honeywell International (HON) reported third-quarter net income of  $2.3 billion or $3.11 per share from $1.3 billion or $1.74 per share in the prior-year period. Reported earnings included separation costs related to the Garrett and Resideo spinoffs as well as a favorable adjustment to US tax legislation-related charges incurred in Q4 2017. Adjusted EPS grew 17% to $2.03. Total sales grew 6% to $10.7 billion from the same period last year. Organic sales grew 7%, driven by growth in the Aerospace business, warehouse automation business and momentum in Homes and ADI global distribution.

Honeywell International Inc. NYSE: HON

Market Reaction > Pre Market $154.93 USD −0.26 (-0.17%)

Highlights

  • Segment margin expanded 70 basis points, 20 basis points above the high end of the company’s guidance, driven by higher volumes and operational excellence initiatives.
  • Honeywell saw sales increases across all its operating segments.
  • Aerospace benefited from strong demand from business aviation OEMs, strength in the domestic and international defense business and growth in the air transport and business aviation aftermarket.
  • Home and Building Technologies saw growth driven by strength in the ADI Global Distribution and Building Solutions businesses as well as demand for commercial fire products and residential thermal solutions.
  • Performance Materials and Technologies division was driven by demand for products and services in the Advanced Materials and Process Solutions businesses as well as engineering sales growth in UOP.
  • Safety and Productivity Solutions growth in sales was helped by double-digit sales growth in the Intelligrated business, strong demand for new mobility solutions and higher sensing and industrial safety volumes.

HON Earnings Q3 18

Outlook

  • Honeywell revised its guidance for the full year of 2018 to reflect the strong operational performance year-to-date and the spinoffs of Garrett Motion and Resideo Technologies.
  • The company now expects sales of $41.7 billion to $41.8 billion and adjusted EPS of $7.95 to $8.00. This compares to the previous outlook for sales of $43.1 billion to $43.6 billion and for adjusted EPS of $8.10 to $8.20.
  • Organic sales growth is expected to be approx. 6% and segment margin expansion is expected to be 50-60 basis points.

Honeywell completed the spinoff of Garrett Motion Inc. on October 1 and expects to complete the Resideo Technologies spinoff on October 29. The company also announced its plans to acquire warehouse automation solutions provider Transnorm for EUR425 million. The transaction is expected to close in November.

During the quarter, the company repurchased approx. $600 million in shares and increased its dividend by 10%.

 

Honeywell International Inc. NYSE: HON Q2 Earnings Recap

Earnings:

Honeywell earnings rose to $2.12 a share adjusted as revenue climbed 8% to $10.92 billion ahead of the forecast $2.01 a share on revenue of $10.78 billion. Net income attributable to Honeywell decreased to $1.26 billion or $1.68 per share from $1.39 billion or $1.80 per share last year. Reported EPS declined 7%.

Honeywell International Inc. NYSE: HON

Market Reaction > Pre-market 151.25 +3.71 (2.51%)

Highlights

  • Operating income margin improved 40 basis points to 16.3%.
  • Segment margin improved 60 basis points to 19.6%.
  • Aerospace sales grew 8% on an organic basis driven by growth in business aviation OE, demand in commercial aftermarket and Transportation Systems along with strength in defense.
  • Home and Building Technologies sales rose 3% organically helped by strength in residential thermal products and growth in the ADI distribution business. 

Outlook:

HON Earnings Q3 Guidance

"Given our strong second-quarter performance and confident outlook, we are raising our 2018 guidance," said CEO Darius Adamczyk.

"For the full year, we now expect organic sales growth to be 5 to 6 percent, segment margin expansion to be 40 to 60 basis points, earnings per share to be $8.05 to $8.15, and free cash flow to be $5.6 to $6.2 billion."

HON Earnings Q2 18

Honeywell will spin off its home and transportation units by year end to streamline.

Honeywell expects to complete the spinoff of its Transportation Systems operations by the end of the third quarter, at which time the business will be rebranded as Garrett. The Homes business spinoff is on track to be completed by the end of 2018. The company’s long-cycle orders and backlog grew 11% and 14% respectively

Source: Honeywell, AlphaStreet

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