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Honeywell (HON) Up 0.5% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Honeywell (HON - Free Report) . Shares have added about 0.5% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Honeywell 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 catalysts.

Honeywell Q1 Earnings & Revenues Outpace Estimates

Honeywell reported better-than-expected first-quarter 2019 results. Adjusted earnings were $1.92 per share, surpassing the Zacks Consensus Estimate of $1.83. The bottom line also improved 12.9% year over year on the back of the company’s stellar operational performance during the quarter.

Honeywell’s first-quarter revenues came in at $8,884 million, surpassing the consensus estimate of $8,621 million. Notably, the top line declined 14.5% year over year. The fall was primarily attributable to impact of spin-offs of some of the company’s businesses in 2018. However, the top line improved 8% organically on the back of strength in its long-cycle businesses in U.S. defense, commercial aerospace and warehouse and process automation, and solid demand for commercial fire and security products.

Segmental Breakup

Revenues for Aerospace were $3,341 million, down 16% year over year. Honeywell Building Technologies revenues declined 43% to $1,389 million. Performance Materials and Technologies revenues were $2,572 million, up 2%. Safety and Productivity Solutions revenues improved 9% to $1,582 million.

Costs/Margins

The company’s total cost of sales in the reported quarter was $5,879 million, down 18.2% year over year. Selling, general and administrative expenses declined 7.6% to $1,363 million. Interest expenses and other financial charges were $85 million compared with $83 million a year ago.

Operating income margin for the first quarter was 18.5%, up 190 basis points year over year.

Balance Sheet/Cash Flow

Exiting the first quarter, Honeywell had cash and cash equivalents of $8,625 million compared with $9,287 million as of Dec 31, 2018. Long-term debt was $8,598 million, lower than $9,756 million recorded at the end of 2018.

During the first quarter, the company generated $1,134 million cash from operating activities, lower than $1,136 million reported a year ago. Capital expenditure was $141 million compared with $140 million incurred in the year-earlier quarter.

Adjusted free cash flow was $1,158 million, up 15.1%.

Outlook

Honeywell revised its full-year guidance for 2019. The company anticipates earnings to be in the range of $7.90-$8.15 per share compared with $7.80-$8.10 guided earlier. It has raised revenue guidance for 2019 between $36.5 billion and $37.2 billion from $36-$36.9 billion predicted earlier.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

Currently, Honeywell has an average Growth Score of C, a grade with the same score on the momentum front. Following the exact same course, 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 trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Honeywell has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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