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Honeywell International Inc. (HON - Analyst Report) reported fourth quarter 2013 net income of $947 million or $1.19 per share versus $251 million or 32 cents per share in the year-ago quarter. The improvement in earnings was driven by an increase in sales across its businesses.

Adjusted earnings stood at $1.24 per share in the reported quarter versus $1.10 in the year-ago quarter. The adjusted earnings beat the Zacks Consensus Estimate of $1.22 per share

For fiscal 2013, the company reported net income of $3,924 million or $4.92 per share versus $2,926 million or $3.69 per share in the year-ago quarter.

Adjusted earnings stood at $4.97 per share for fiscal 2013 versus $4.48 per share in the year-ago quarter. The adjusted earnings beat the Zacks Consensus Estimate of $4.95 per share.
    
Revenues

Revenues in fourth quarter 2013 increased 8.0% year over year to $10,387 million. Total revenue beats the Zacks Consensus Estimate of $10,199 million.
    
Revenues in fiscal 2013 increased 4.0% year over year to $39,055 million. Total revenue beats the Zacks Consensus Estimate of $38,872 million.

Operating margins were down 50 bps year over year to 13.4% in the reported quarter. However, operating margins expanded 60 bps year over year to 14.2% in the current fiscal.  
    
Segment Performance

Aerospace segment sales increased 3% year over year in the reported quarter to $3,099 million primarily driven by Commercial growth and increase in Defense and Space. However, segment profit increased 6% year over year to $636 million on the back of commercial excellence and productivity net of inflation, partially offset by investments for growth.
    
Margins rose 60 bps year over year to 20.5 %.

Automation and Control Solutions segment sales were up 10% year over year in the reported quarter to $4,576 million. The growth was driven primarily by new product launches, growth in energy, safety, and security, favorable impact of acquisitions and strength in Americas Distribution business.

Moreover, segment profit surged 8% to $698 million driven by impact of acquisitions, higher building solutions and distribution sales and continued investments for growth, partially offset by volume and productivity net of inflation. However, margins for this segment were down 20 bps year over year to 15.3%.

Transportation Systems segment revenues of $978 million for the quarter increased 16% year over year due to continued growth from new platform launches, higher global turbo gas penetration and light vehicle production, and an increase in China commercial vehicle demand.

In addition, segment profit reported growth of 41% year over year to $133 million mainly driven by strong Turbo material productivity and volume leverage and operational improvements in Friction Materials.

Margins for this segment were 13.6%, up 250 bps year over year.

Performance Materials and Technologies segment sales increased 12% during the quarter to $1.7 billion due to favorable impact of the acquisition of Thomas Russell and improved production volumes in Advanced Materials.

However, segment profit increased 30% to $272 million, driven by strong volume and productivity, partially offset by continued investments for growth. Margins in the segment increased 210 bps year over year to 15.7%.

Balance Sheet

Cash and cash equivalents as of Dec 31, 2013 were $6.4 billion. Long-term debt at year end was $6.8 billion.

Cash Flow

Cash flow from operating activities improved to $4,355 billion as of Dec 31, 2013 compared with $3,517 million in the prior year.

Outlook

Honeywell provided sales guidance for 2014 in the range of $40.3–$40.7 billion. Honeywell gave EPS guidance in the range of $5.35 to $5.55. Operating margin is expected to be in the range of 15.2%–15.5%. Free cash flow is expected to be in the range of $3.8 billion–$4.0 billion.

Share prices dropped in pre-market trading as investors probably expected a more positive outlook from the company with a healthy beat in earnings.

Honeywell currently has a Zacks Rank #3 (Hold). Other stocks that look promising and are worth a look include Carlisle Companies Inc. (CSL - Snapshot Report), Hutchison Whampoa Ltd. (HUWHY) and Crane Co. (CR - Snapshot Report), each carrying a Zacks Rank #2 (Buy).

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