Honeywell Shares Relatively Unresponsive Despite Solid Earnings Beat

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Honeywell International Inc. (NYSE: HON) released its most recent earnings report before the markets opened on Friday. The company posted $1.80 in earnings per share (EPS) and $10.1 billion in revenue versus consensus estimates from Thomson Reuters that called for $1.78 in EPS and $9.89 billion in revenue. The second quarter from last year had $1.70 in EPS and $9.99 billion in revenue.

In terms of its business segments, the company reported:

  • Aerospace sales were up 2% on an organic basis to $3.67 billion driven by strength in the commercial aftermarket, growth in U.S. defense, and a continuing recovery in commercial vehicles in transportation systems.
  • Home and Building Technologies sales were up 4% on an organic basis to $2.74 billion driven by Smart Energy program roll-outs, air and water product sales in China, and continued growth in the Distribution business.
  • Performance Materials and Technologies sales were up 6% on an organic basis to $2.24 billion driven by continued strength in Solstice sales in Advanced Materials and double-digit growth in modular gas processing in UOP.
  • Safety and Productivity Solutions sales were up 1% on an organic basis to $1.43 billion as a result of higher volumes in industrial safety products, sensing controls, and voice-enabled workflow solutions.

As for the outlook for the 2017 full year, Honeywell increased its guidance to a range $7.00 to $7.10 in EPS and $39.3 billion to $40.0 billion in revenue, from the previous ranges of $6.90 to $7.10 in EPS and $38.6 billion to $39.5 billion. The consensus estimates are calling for $7.09 in EPS and $39.43 billion in revenue for the full year.

Darius Adamczyk, President and CEO of Honeywell, commented:

Honeywell’s strong performance continued through the second quarter, with over 3% organic sales growth that exceeded the high end of our guidance range, and 50 basis points of segment margin expansion, resulting in second-quarter earnings per share of $1.80. Earnings came in at the high end of our guidance range, up 10% year-over-year. We continued our investments to enhance future profitable growth through new product introductions, additions to the sales organization, and more than $115 million of restructuring funding in the quarter, made possible by a lower-than-planned tax rate. Quarterly free cash flow of $1.2 billion was impacted by the timing of cash tax payments, and our first half performance remained strong with nearly 40% growth in free cash flow year-over-year.

Shares of Honeywell closed Thursday at $134.95, with a consensus analyst price target of $140.50 and a 52-week range of $105.25 to $136.41, a new high posted yesterday. Following the release of the earnings report, the stock traded up about 0.2% at $135.20 in Friday’s premarket session.