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Honeywell (HON) Q2 Earnings & Revenues Top Estimates, Down Y/Y

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Honeywell International Inc. (HON - Free Report) has reported better-than-expected results in second-quarter 2020, wherein both earnings and revenues surpassed estimates.

Earnings & Revenues

Adjusted earnings were $1.26 per share, surpassing the Zacks Consensus Estimate of $1.15. However, the bottom line declined 40% year over year on account of lower sales.

Honeywell’s second-quarter revenues were $7,477 million, beating the consensus estimate of $7,237 million. The top line recorded a decline of 19% on a year-over-year basis. Notably, the fall was primarily attributable to an 18% decline in organic revenues on account of weakness in end markets due to the coronavirus outbreak-led issues and oil price volatility.

Honeywell International Inc. Price, Consensus and EPS Surprise

 

Honeywell International Inc. Price, Consensus and EPS Surprise

Honeywell International Inc. price-consensus-eps-surprise-chart | Honeywell International Inc. Quote

Segmental Breakup

Aerospace’s revenues were $2,543 million, down 28% year over year. Honeywell Building Technologies’ revenues declined 19% to $1,177 million. Performance Materials and Technologies generated $2,218 million revenues, down 19%, while that for Safety and Productivity Solutions declined 1% to $1,539 million.

Costs/Margins

The company’s total cost of sales for the reported quarter was $5,276 million, down 13.4% year over year. Selling, general and administrative expenses declined 14.7% to $1,183 million. Interest expenses and other financial charges were $90 million compared with $85 million a year ago.

Operating income margin in the second quarter was 13.6%, down 550 basis points year over year.

Balance Sheet/Cash Flow

Exiting the second quarter of 2020, Honeywell had cash and cash equivalents of $13,778 million compared with $9,067 million as of Dec 31, 2019. Long-term debt was $17,591 million, higher than $11,110 million recorded at the end of 2019.

During the first six months of 2020, the company generated $2,419 million in cash from operating activities compared with $2,812 million generated in the year-ago comparable period. Capital expenditure was $366 million compared with $312 million incurred in the year-ago comparable period.

Adjusted free cash flow in the quarter was $1,253 million, down 18.4% year over year.

Outlook

Honeywell expects its near-term revenues to be adversely impacted by soft aerospace, and oil and gas end markets, owing to the coronavirus outbreak-led issues and supply-chain disruptions. However, it remains focused on managing costs, investment in new technologies and boosting sales, where demand remains strong.

Notably, on uncertainties, regarding the impacts of the coronavirus outbreak on financial and operating results, the company has not provided its guidance for 2020.

Zacks Rank & Stocks to Consider

Honeywell currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks are Altra Industrial Motion Corp. (AIMC - Free Report) , Berry Global Group, Inc. (BERY - Free Report) and CECO Environmental Corp. (CECE - Free Report) . All the companies presently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Altra Industrial delivered an earnings surprise of 9.78%, on average, in the trailing four quarters.

Berry Global delivered an earnings surprise of 6.63%, on average, in the trailing four quarters.

CECO Environmental delivered an earnings surprise of 23.57%, on average, in the trailing four quarters.

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