Conglomerates Bracing For GE & Honeywell Earnings… Higher Expectations (GE, HON, MMM, UTX, TYC)

April 18, 2012 by Jon C. Ogg

Conglomerates are soft so far on Wednesday but they have turned up ahead of the wave of earnings this week.  A screen at Finviz showed that the conglomerate sector is leading the pack of sectors with a 5.1% gain just in the last week ahead of the gains industrial goods, services, and the financial sectors.  Does this aim to imply that both General Electric Co. (NYSE: GE) as the king of utilities and then Honeywell International Inc (NYSE: HON) will be turning in solid earnings reports this Friday morning?

What investors seem to be banking on is that General Electric is going to not just meet and guide in-line, and they may be hoping for the same from Honeywell.  It is too soon to expect more dividend hikes from either company, so it may be a puzzle as to what investors really think they are going to hear this Friday.

General Electric Co. (NYSE: GE) closed out last Friday at $18.88 but Tuesday’s 2.3% to $19.34 gain seems to have created some new excitement. What investors are hoping for in specifics is a focus not on Europe and a continued improvement at GE Capital.  The year high is $21.00 and the consensus is $22.29, implying upside of 15%.  That is more expected upside than in most analyst targets to most DJIA components.  Thomson Reuters has estimates of $0.33 EPS and $34.66 billion in revenue.  Shares are indicated softer on Wednesday and everyone should be paying very close attention that 50-day moving average which is at $19.34 today.

Honeywell International Inc (NYSE: HON) is trading at $58.93 and is also close to its 50-day moving average up at $59.55.  Suddenly the charts matter here.  The Thomson Reuters consensus targets are $0.99 EPS and $9.16 billlion in revenue.  Te $58.93 compares to a 52-week range of $41.22 to $62.28 and the consensus price target from Thomson Reuters is $67.95.

3M Co. (NYSE: MMM) and United Technologies Corporation (NYSE: UTX) are both set to turn in their respective conglomerate earnings reports next week on April 24.  For 3M the pre-GE and pre-Honeywell report is $1.49 EPS from Thomson Reuters.  The price this morning of $87.45 compares to a consensus price target of $95.17 and it is worth noting that 3M is trading under its 52-week high of $98.19.

United Tech is expected to report earnings of $1.20 EPS on sales of $12.76 billion. Its $81.00 share price compares to a 52-week high of $91.83 and compares to the Thomson Reuters consensus price target of $94.70.  As it stands, this actually implies almost 17% upside expected in shares of United Tech and that makes it the most anticipated earnings report of the large-cap conglomerate stocks.

Tyco International Ltd. (NYSE: TYC) also reports next week on April 26.  This is turning into more of a “deglomerate” and because of the restructuring and break-up with the ADT spin-off we are not sure how to rank this one other than what the ticker-tape has told you.  At $54.57, the 52-week range is $37.39 to $56.66 and Thomson Reuters has a consensus price target of $60.00.  Because of the restructuring here we are just going

If GE and Honeywell both manage to please Wall Street on Friday, investors are likely going to ratchet their expectations a tad higher for 3M and United Tech ahead of earnings next week.

Stay tuned.

JON C. OGG

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