Honeywell beats earnings estimates; revises guidance

Honeywell International (HON) reported third-quarter 2018 sales that came in line with analysts’ expectations and earnings that topped estimates. After climbing as much as 3.2% during premarket hours on Friday, the stock is currently up around 2.9%.

Total sales grew 6% to $10.7 billion from the same period last year. Organic sales grew 7%, driven by growth in the Aerospace business, warehouse automation business and momentum in Homes and ADI global distribution.

Net income attributable to Honeywell grew to $2.3 billion or $3.11 per share from $1.3 billion or $1.74 per share in the prior-year period. Reported earnings included separation costs related to the Garrett and Resideo spinoffs as well as a favorable adjustment to US tax legislation-related charges incurred in Q4 2017. Adjusted EPS grew 17% to $2.03.

Segment margin expanded 70 basis points, 20 basis points above the high end of the company’s guidance, driven by higher volumes and operational excellence initiatives.

Honeywell posted sales increases across all its operating segments. Aerospace benefited from strong demand from business aviation OEMs, strength in the domestic and international defense business and growth in the air transport and business aviation aftermarket.

Home and Building Technologies saw growth driven by strength in the ADI Global Distribution and Building Solutions businesses as well as demand for commercial fire products and residential thermal solutions.

Sales growth in the Performance Materials and Technologies division was driven by demand for products and services in the Advanced Materials and Process Solutions businesses as well as engineering sales growth in UOP.

In Safety and Productivity Solutions, the growth in sales was helped by double-digit sales growth in the Intelligrated business, strong demand for new mobility solutions and higher sensing and industrial safety volumes.

Earnings Preview: Higher expenses to weigh on Honeywell’s Q3

Honeywell revised its guidance for the full year of 2018 to reflect the strong operational performance year-to-date and the spinoffs of Garrett Motion and Resideo Technologies.

The company now expects sales of $41.7 billion to $41.8 billion and adjusted EPS of $7.95 to $8.00. This compares to the previous outlook for sales of $43.1 billion to $43.6 billion and for adjusted EPS of $8.10 to $8.20. Organic sales growth is expected to be approx. 6% and segment margin expansion is expected to be 50-60 basis points.

Honeywell completed the spinoff of Garrett Motion Inc. on October 1 and expects to complete the Resideo Technologies spinoff on October 29. The company also announced its plans to acquire warehouse automation solutions provider Transnorm for EUR425 million. The transaction is expected to close in November.

During the quarter, the company repurchased approx. $600 million in shares and increased its dividend by 10%.

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