Categories Analysis, Earnings, Industrials

Earnings preview: Honeywell is ready for a fresh start

Honeywell International Inc. (HON) is scheduled to report earnings results for the fourth quarter of 2018 on Friday, February 1, before market open. The Street expects the company to post earnings of $1.88 per share on revenues of $9.6 billion. Revenue is expected to decline 10% year-over-year.

Honeywell has consistently surpassed earnings estimates over the past four quarters and this trend is likely to continue in the fourth quarter. The company completed the spinoff of Resideo Technologies, which comprises its Homes and Global Distribution businesses, at the end of October.

Earlier that month, prior to its third-quarter results announcement, Honeywell completed the spinoff of its Transportation business into a standalone entity named Garrett Motion.

With the spinoffs of both Garrett and Resideo now complete, one can expect several changes at Honeywell. The company is better positioned to focus on areas like aerospace which have high growth potential. The spinoffs are likely to be beneficial to the company in the long term as it would provide more flexibility in terms of capital allocation and other growth initiatives.

Honeywell also completed the acquisition of Transnorm in November. Transnorm will complement the company’s automation solutions business. Any updates on the changes stemming from the spinoffs and acquisitions will be worth noting.

Honeywell beats earnings estimates; revises guidance

In the third quarter, Honeywell reported earnings that topped estimates along with sales that matched expectations. Net sales grew 6% to $10.7 billion while adjusted earnings rose 17% to $2.03 per share. The Aerospace business grew 10%, helped by strong demand from business aviation OEMs as well as growth in the air transport and business aviation aftermarket.

Last quarter, Honeywell revised its guidance for the full year of 2018 to reflect the Garrett and Resideo spinoffs. The outlook for sales is $41.7 billion to $41.8 billion and adjusted EPS is $7.95 to $8.00.

A majority of analysts have rated Honeywell’s stock as Buy with the remaining rating it as Hold. None have recommended Sell. Over the past one month, the stock has gained 8%.


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