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Honeywell (HON) Beats on Earnings in Q3, Tweaks Guidance
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Honeywell International Inc. (HON - Free Report) reported strong third-quarter 2016 results. Quarterly adjusted earnings per share (EPS) came in at $1.67 (including 7 cents per share deployed in restructuring), beating the Zacks Consensus Estimate and improving from $1.60 per share earned a year ago.
Third-quarter revenues inched up 2% year over year to $9,804 million and exceeded the Zacks Consensus Estimate of $9,769 million. The upside was driven by higher sales accrued from the company’s Home and Building Technologies and Performance Materials and Technologies business.
Total segment profit was $1,720 million compared with $1,852 million in the year-ago quarter. Overall segment profit margin weakened to 17.5% from 19.3% in the prior-year period.
Operating income decreased to $1,534 million from $1,755 million in third-quarter 2015. Operating margin during the quarter was 15.6%, down 270 basis points (bps).
Segment Performance
Aerospace sales were $3,601 million in the reported quarter, down 6% year over year. The downside was due to lower volumes in Business and General Aviation, the unlikely impact of quarter original equipment manufacturing incentives, program accomplishment of the international defense and U.S. Space businesses and weakness in commercial helicopter trade.
Home and Building Technologies sales came in at $2,701 million, up 17% year over year. The upside was driven by robust Distribution and Building Solutions businesses, and Products increment in Environment & Energy Solutions trade.
Performance Materials and Technologies revenues were $2,329 million, up 2% year over year. The improvement came on the back of robust catalyst shipments and conversion of worldwide giant projects in Process Solutions.
Safety and Productivity Solutions’ top line was $1,173 million, down 2% year over year. The segment’s sales dipped due to weaker volumes of Safety as well as Productivity Solutions’ trade, continued headwinds in the market and completion of the United States Postal Service contract.
Balance Sheet and Cash Flow
Cash and cash equivalents as of Sep 30, 2016 were $6,431 million and long-term debt was $9,608 million.
Net cash provided from operating activities for the three months ended Sep 30, 2016, was $1,544 million compared with $1,693 million in the prior-year period. Free cash flow decreased 9.6% to $1,280 million during the quarter.
Outlook
Honeywell aims to improve its revenues and margins in the upcoming quarters backed by greater business internationalization, innovation and product portfolio solidification. Based on favorable business conditions, the company revised its full-year earnings guidance.
Earnings are now expected in the range of $6.60–$6.64 per share, up 8–9% year over year. Revenue guidance was revised to the range of $39.4–$39.6 billion, up 2–3% year over year.
Raven Industries delivered an average positive earnings surprise of 63.24% over the last four trailing quarters.
Macquarie Infrastructure Corporation’s average positive earnings surprise is 11.07% for the last four trailing quarters.
Danaher Corp. delivered an average positive earnings surprise of 5.12% over the last four trailing quarters.
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Honeywell (HON) Beats on Earnings in Q3, Tweaks Guidance
Honeywell International Inc. (HON - Free Report) reported strong third-quarter 2016 results. Quarterly adjusted earnings per share (EPS) came in at $1.67 (including 7 cents per share deployed in restructuring), beating the Zacks Consensus Estimate and improving from $1.60 per share earned a year ago.
Operational Details
Third-quarter revenues inched up 2% year over year to $9,804 million and exceeded the Zacks Consensus Estimate of $9,769 million. The upside was driven by higher sales accrued from the company’s Home and Building Technologies and Performance Materials and Technologies business.
Total segment profit was $1,720 million compared with $1,852 million in the year-ago quarter. Overall segment profit margin weakened to 17.5% from 19.3% in the prior-year period.
Operating income decreased to $1,534 million from $1,755 million in third-quarter 2015. Operating margin during the quarter was 15.6%, down 270 basis points (bps).
Segment Performance
Aerospace sales were $3,601 million in the reported quarter, down 6% year over year. The downside was due to lower volumes in Business and General Aviation, the unlikely impact of quarter original equipment manufacturing incentives, program accomplishment of the international defense and U.S. Space businesses and weakness in commercial helicopter trade.
Home and Building Technologies sales came in at $2,701 million, up 17% year over year. The upside was driven by robust Distribution and Building Solutions businesses, and Products increment in Environment & Energy Solutions trade.
Performance Materials and Technologies revenues were $2,329 million, up 2% year over year. The improvement came on the back of robust catalyst shipments and conversion of worldwide giant projects in Process Solutions.
Safety and Productivity Solutions’ top line was $1,173 million, down 2% year over year. The segment’s sales dipped due to weaker volumes of Safety as well as Productivity Solutions’ trade, continued headwinds in the market and completion of the United States Postal Service contract.
Balance Sheet and Cash Flow
Cash and cash equivalents as of Sep 30, 2016 were $6,431 million and long-term debt was $9,608 million.
Net cash provided from operating activities for the three months ended Sep 30, 2016, was $1,544 million compared with $1,693 million in the prior-year period. Free cash flow decreased 9.6% to $1,280 million during the quarter.
Outlook
Honeywell aims to improve its revenues and margins in the upcoming quarters backed by greater business internationalization, innovation and product portfolio solidification. Based on favorable business conditions, the company revised its full-year earnings guidance.
Earnings are now expected in the range of $6.60–$6.64 per share, up 8–9% year over year. Revenue guidance was revised to the range of $39.4–$39.6 billion, up 2–3% year over year.
HONEYWELL INTL Price, Consensus and EPS Surprise
HONEYWELL INTL Price, Consensus and EPS Surprise | HONEYWELL INTL Quote
Honeywell’s stock was valued $108.27 per share as of Oct 19, 2016.
Zacks Rank & Stocks to Consider
Honeywell currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the same space are Raven Industries Inc. , Macquarie Infrastructure Corporation and Danaher Corp. (DHR - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Raven Industries delivered an average positive earnings surprise of 63.24% over the last four trailing quarters.
Macquarie Infrastructure Corporation’s average positive earnings surprise is 11.07% for the last four trailing quarters.
Danaher Corp. delivered an average positive earnings surprise of 5.12% over the last four trailing quarters.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>