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Honeywell International Inc. (HON) Down 0.2% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Honeywell International Inc. (HON - Free Report) . Shares have lost about 0.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Honeywell International Inc. due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Honeywell Q4 Earnings & Revenues Surpass Estimates

Honeywell has reported better-than-expected fourth-quarter 2020 results, wherein both earnings and revenues surpassed estimates.

Earnings & Revenues

Adjusted earnings were $2.07 per share, surpassing the Zacks Consensus Estimate of $2.00. Moreover, the bottom line was up 0.5% year over year.

In 2020, the company’s adjusted earnings came in at $7.10, down 13% year over year.

Honeywell’s fourth-quarter revenues were $8,900 million, surpassing the consensus estimate of $8,358 million. The top line fell 6% year over year on a reported basis and 7% on an organic basis, owing to weakness in end markets due to the coronavirus outbreak-led issues.

In 2020, the company’s revenues were $32,637 million, down 11% on a year-over-year basis.

Segmental Breakup

Aerospace’s quarterly revenues were $2,978 million, down 19% year over year. Honeywell Building Technologies’ revenues declined 3% to $1,426 million. Performance Materials and Technologies’ revenues totaled $2,556 million, down 11%, while that for Safety and Productivity Solutions increased 28% to $1,940 million.

Costs/Margins

The company’s total cost of sales in the reported quarter was $5,976 million, down 5.6% year over year. Selling, general and administrative expenses declined 15.3% to $1,248 million. Interest expenses and other financial charges were $95 million compared with $91 million a year ago.

Operating income margin in the fourth quarter was 18.8%, up 100 basis points year over year.

Balance Sheet/Cash Flow

Exiting 2020, Honeywell had cash and cash equivalents of $14,275 million compared with $9,067 million as of Dec 31, 2019. Long-term debt was $16,342 million, higher than $11,110 million recorded at the end of 2019.

In 2020, the company generated $6,208 million in cash from operating activities compared with $6,897 million a year ago. Capital expenditure was $906 million compared with $839 million incurred in 2019.

Adjusted free cash flow in the quarter was $2,491 million, up 8.7% year over year.

Outlook

Honeywell provided guidance for full-year 2021. For the year, the company anticipates earnings to be in the range of $7.60 to $8.00 per share, suggesting 9.9% year-over-year improvement at the mid-point. It anticipates revenues to be between $33.4 billion and $34.4 billion, with organic revenues expected to be up 1-4%.

For 2021, it also expects operating cash flow in the range of $5.7 billion to $6.1 billion, and free cash flow to be between $5.1 billion and $5.5 billion.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, Honeywell International Inc. has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Honeywell International Inc. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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