Honeywell Earnings Buoyed by Promises of 2017 Improvement

Paul Ausick

Honeywell International Inc. (NYSE: HON) reported third-quarter 2016 results before markets opened Friday. The conglomerate posted adjusted diluted earnings per share (EPS) of $1.67 on revenues of $9.8 billion. In the same period a year ago, the company reported GAAP EPS of $1.60 on revenues of $9.61 billion. Third-quarter results also compare to the Thomson Reuters consensus estimates for $1.70 in EPS and $9.79 billion in revenues.

On a GAAP basis, third-quarter EPS was flat at $1.60, which excludes $0.07 per share in restructuring charges. Net income for the quarter totaled $1.25 billion, down from $1.28 billion in the same period last year.

The company revised its fiscal 2016 guidance earlier this month. The top end of prior adjusted EPS guidance has been lowered from $6.70 to $6.64 while the low end remained unchanged at $6.60, about 8% to 9% higher than last year. Sales guidance decreased from a range of $40.0 billion to $40.6 billion to a new range of $39.4 billion to $39.6 billion. Operating margin guidance is now approximately 17.6% and free cash flow guidance was lowered from a range of $4.6 billion to $4.8 billion to a new range of $4.2 billion to $4.3 billion.

Honeywell’s chairman and CEO Dave Cote said:

The third-quarter results came in as we outlined on our October 7 conference call. We are well-positioned for double-digit earnings growth in the fourth quarter, leading to 8%-9% earnings growth in 2016. … [The] actions [we took] will drive more than $175 million of benefits in 2017 alone. We also intend in the fourth quarter to refinance outstanding debt maturing in 2017-2019, which will lower interest expense by approximately $60 million annually beginning in 2017.

The company repurchased $233 million in common stock and paid $453 million in dividends during the third quarter.

Honeywell’s shares closed down about 0.1% at $108.14 on Thursday and traded up about 1.8% in premarket trading Friday. The stock’s 52-week range is $93.71 to $120.02. The consensus 12-month price target was $124.06 before the report.