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Why Is Honeywell (HON) Up 6% Since the Last Earnings Report?
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It has been about a month since the last earnings report for Honeywell International Inc. (HON - Free Report) . Shares have added about 6% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock’s next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Honeywell reported relatively modest fourth-quarter 2016 results. Quarterly adjusted earnings per share (EPS) came in at $1.74, in line with the Zacks Consensus Estimate, but up from $1.53 in the year-ago quarter. GAAP EPS for the quarter was $1.34 per share compared with $1.54 in the year-ago quarter.
Fourth-quarter revenues were flat at $9,985 million, compared with $9,982 million in the year-ago quarter. However, the revenues missed the Zacks Consensus Estimate of $10,152 million. Organic revenue growth was down 1% year over year due to the spin-off of Resins and Chemicals in Performance Materials and Technologies and the divestiture of the Aerospace government services business. The decline was partially offset by acquisitions of Elster and Intelligrated.
For full-year 2016, the company reported adjusted earnings of $6.60 per share compared with prior-year’s earnings of $6.10. Revenues for the full year were $39,302 million compared with $38,581 million in the prior year. The improvement in revenues was primarily attributable to the superior performance of the Home and Building Technologies and Performance Materials and Technologies segments.
Operational Details
Total segment’s profit was $1,899 million compared with $1,880 million in the year-ago quarter. Overall segment profit margin slightly improved to 19.0% from 18.8% in the prior-year period, an increase of 20 basis points (bps).
Operating income (excluding pension mark-to-market adjustment and debt refinancing expense) increased to $2,012 million from $1,800 million in fourth-quarter 2015. Operating margin during the quarter was 16.2%, down 120 bps.
Segmental Performance
Aerospace sales were $3,666 million in the reported quarter, down 8% year over year. The downside was due to lower volumes in Business and General Aviation, 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 $2,800 million, up 13% year over year. The upside was driven by robust Distribution and Building Solutions businesses, double-digit growth in China and India, as well as new product introductions in Environmental and Energy Solutions.
Performance Materials and Technologies revenues were $2,228 million, down 5% year over year.
Safety and Productivity Solutions’ top line was $1,291 million, up 9% year over year. This is due to restructuring benefits and commercial excellence, partially offset by lower volumes across the portfolio.
Balance Sheet and Cash Flow
Cash and cash equivalents as of Dec 31, 2016 were $7,843 million compared with $5,455 million in the year-ago period. Long-term debt was $12,182 million compared with $5,554 million in the year-ago period.
Net cash from operating activities for the three months ended Dec 31, 2016, was $2,042 million compared with $1,963 million in the prior-year period. Free cash flow was $1,696 million during the quarter compared with $1,575 million in the year ago quarter.
Guidance Reiterated
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 reiterated its full-year earnings guidance.
However, Honeywell expects a tepid demand pattern for its business jets and mobile scanners in 2017 due to sluggish global growth, volatility in crude oil prices and a tempered Chinese economy. Consequently, the company projects 2017 earnings in the range of $6.85–$7.10 per share, while revenues are anticipated to be down 1% to up 2% year over year.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month. There have been three revisions higher for the current quarter compared to three lower.
At this time, Honeywell's stock has a nice Growth Score of 'B', though it is lagging a little on the momentum front with a 'C'. 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 aggregte VGM Score of 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for growth investors than value and momentum investors.
Outlook
The stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.
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Why Is Honeywell (HON) Up 6% Since the Last Earnings Report?
It has been about a month since the last earnings report for Honeywell International Inc. (HON - Free Report) . Shares have added about 6% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock’s next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Honeywell Posts In-Line Q4 Earnings, Reaffirms View
Honeywell reported relatively modest fourth-quarter 2016 results. Quarterly adjusted earnings per share (EPS) came in at $1.74, in line with the Zacks Consensus Estimate, but up from $1.53 in the year-ago quarter. GAAP EPS for the quarter was $1.34 per share compared with $1.54 in the year-ago quarter.
Fourth-quarter revenues were flat at $9,985 million, compared with $9,982 million in the year-ago quarter. However, the revenues missed the Zacks Consensus Estimate of $10,152 million. Organic revenue growth was down 1% year over year due to the spin-off of Resins and Chemicals in Performance Materials and Technologies and the divestiture of the Aerospace government services business. The decline was partially offset by acquisitions of Elster and Intelligrated.
For full-year 2016, the company reported adjusted earnings of $6.60 per share compared with prior-year’s earnings of $6.10. Revenues for the full year were $39,302 million compared with $38,581 million in the prior year. The improvement in revenues was primarily attributable to the superior performance of the Home and Building Technologies and Performance Materials and Technologies segments.
Operational Details
Total segment’s profit was $1,899 million compared with $1,880 million in the year-ago quarter. Overall segment profit margin slightly improved to 19.0% from 18.8% in the prior-year period, an increase of 20 basis points (bps).
Operating income (excluding pension mark-to-market adjustment and debt refinancing expense) increased to $2,012 million from $1,800 million in fourth-quarter 2015. Operating margin during the quarter was 16.2%, down 120 bps.
Segmental Performance
Aerospace sales were $3,666 million in the reported quarter, down 8% year over year. The downside was due to lower volumes in Business and General Aviation, 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 $2,800 million, up 13% year over year. The upside was driven by robust Distribution and Building Solutions businesses, double-digit growth in China and India, as well as new product introductions in Environmental and Energy Solutions.
Performance Materials and Technologies revenues were $2,228 million, down 5% year over year.
Safety and Productivity Solutions’ top line was $1,291 million, up 9% year over year. This is due to restructuring benefits and commercial excellence, partially offset by lower volumes across the portfolio.
Balance Sheet and Cash Flow
Cash and cash equivalents as of Dec 31, 2016 were $7,843 million compared with $5,455 million in the year-ago period. Long-term debt was $12,182 million compared with $5,554 million in the year-ago period.
Net cash from operating activities for the three months ended Dec 31, 2016, was $2,042 million compared with $1,963 million in the prior-year period. Free cash flow was $1,696 million during the quarter compared with $1,575 million in the year ago quarter.
Guidance Reiterated
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 reiterated its full-year earnings guidance.
However, Honeywell expects a tepid demand pattern for its business jets and mobile scanners in 2017 due to sluggish global growth, volatility in crude oil prices and a tempered Chinese economy. Consequently, the company projects 2017 earnings in the range of $6.85–$7.10 per share, while revenues are anticipated to be down 1% to up 2% year over year.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month. There have been three revisions higher for the current quarter compared to three lower.
Honeywell International Inc. Price and Consensus
Honeywell International Inc. Price and Consensus | Honeywell International Inc. Quote
VGM Scores
At this time, Honeywell's stock has a nice Growth Score of 'B', though it is lagging a little on the momentum front with a 'C'. 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 aggregte VGM Score of 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for growth investors than value and momentum investors.
Outlook
The stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.