Honeywell International Inc. (HON - Analyst Report) issued its financial guidance for 2012 while reaffirming its outlook for the current year. The company expects a 4% to 7% increase in its 2012 sales in comparison to 2011, with the forecasted sales range of $37.8 billion to $38.9 billion for 2012.
Earnings per share (EPS) for the next year are expected to be $4.25-4.50, representing a year-over-year increase of 6% to 12%. Pro forma EPS from continuing operations will witness projected growth of 13% to 19%, excluding mark-to-market pension adjustments. Margin will expand by 40-70 basis points, driven by strong sales conversion.
Free cash flow for the year is expected to be approximately $3.5 billion, excluding cash pension contributions.
The company maintained its 2011 guidance, with sales expected to be approximately $36.5 billion, up 13% over 2010. Sales for the year exclude the divested CPG business, which is treated as discontinued operations. Proforma earnings per share is expected to be approximately $4.03, up 34% over 2010 and free cash flow of approximately $3.5 billion.
Honeywell’s short-cycle businesses as well as its commercial aerospace spares and residential and commercial retrofit businesses are performing impressively and are expected to support the company’s growth outlook. The short-cycle businesses of the company, like Turbo Technologies, Advanced Materials, and ACS Products, continue to perform well. Honeywell’s long-cycle backlog continued to be at near record levels.
The company expects to face a more challenging macro environment in 2012, witnessing slower year-over-year growth worldwide in GDP and industrial production. With a robust long-cycle backlog of almost $16 billion, strong growth in commercial aerospace aftermarket, and continued contributions from short-cycle businesses, the company expects to grow faster than its end markets. In 2012, Honeywell will deliver strong earnings growth and free cash flow conversion, led by its good portfolio mix and continued margin expansion.
Based in Morris Township, N.J., Honeywell International Inc. is a Fortune 100 company providing technical and manufacturing support to customers worldwide with aerospace products and services; control technologies for buildings, homes and industry; automotive products; turbochargers; and specialty materials. The major competitors of Honeywell are BorgWarner Inc. (BWA - Analyst Report), United Technologies Corp. (UTX - Analyst Report) and Johnson Controls Inc. (JCI - Analyst Report).
We currently maintain our Neutral rating on Honeywell, with a Zacks #3 Rank (Hold recommendation) over the next one to three months.