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Honeywell (HON) Q1 Earnings Beat Estimates, Revenues Miss

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Honeywell International Inc. (HON - Free Report) has reported mixed first-quarter 2020 results, wherein earnings beat estimates but revenues lagged the same.

Earnings & Revenues

Adjusted earnings were $2.21 per share, surpassing the Zacks Consensus Estimate of $1.98. The bottom line also jumped 15% year over year, driven by higher operating profit.

Honeywell’s first-quarter revenues were $8,463 million, missing the consensus estimate of $8,679 million. The top line recorded a decline of 5% on a year-over-year basis. Notably, the fall was primarily attributable to a 4% decline in organic revenues on account of weakness in its commercial aerospace, and oil and gas end markets due to the coronavirus outbreak.

Segmental Breakup

Aerospace’s revenues were $3,361 million, up 1% year over year. Honeywell Building Technologies’ revenues declined 8% to $1,281 million. Performance Materials and Technologies generated $2,397 million revenues, down 7%, while that for Safety and Productivity Solutions declined 10% to $1,424 million.

Costs/Margins

The company’s total cost of sales in the reported quarter was $5,534 million, down 5.9% year over year. Selling, general and administrative expenses declined 9.2% to $1,238 million. Interest expenses and other financial charges were $73 million compared with $85 million a year ago.

Operating income margin in the first quarter was 20%, up 150 basis points year over year.

Balance Sheet/Cash Flow

Exiting the first quarter of 2020, Honeywell had cash and cash equivalents of $7,721 million compared with $9,067 million as of Dec 31, 2019. Long-term debt was $11,542 million, higher than $11,110 million recorded at the end of 2019.

During the first three months of 2020, the company generated $939 million in cash from operating activities compared with $1,134 million generated in the year-ago comparable period. Capital expenditure was $139 million compared with $141 million incurred in the year-ago comparable period.

Adjusted free cash flow was $800 million, down 30.9% 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-led issues and supply-chain disruptions. However, it remains focused on its operational excellence measures to boost profitability.

Notably, on uncertainties, regarding the impacts of the coronavirus outbreak on financial and operating results, the company has now temporarily suspended its guidance for 2020.

Zacks Rank & Stocks to Consider

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

Some better-ranked stocks are Acco Brands Corporation (ACCO - Free Report) , CECO Environmental Corp. and Intellicheck, Inc. (IDN - Free Report) . All the companies currently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Acco Brands delivered a positive earnings surprise of 19.04%, on average, in the trailing four quarters.

CECO Environmental delivered a positive earnings surprise of 26.98%, on average, in the trailing four quarters.

Intellicheck delivered a positive earnings surprise of 36.91%, on average, in the trailing four quarters.

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