Friday, October 19, 2012

Honeywell (HON) Q3 earnings release

Honeywell came out with a good quarter in beating analysts’ estimates for a fifth quarter in a row. Having an increase in EPS of 9% to $1.20 from $1.10 it blew past estimates of 1.14 for the company. Sales for the company as a whole had a pretty shallow growth of 2% to 9.34 billion which were below estimates, but with a segment profit increase of 8% with a margin percentage increase of 110 basis points. With Net Income having a 10% increase from $862M in Q3 2011 to $920M in Q3 2012 the company has proven its investments in new products and high growth regions, such as natural gas, and a balanced mix of long- and short-term business cycles was able to offset their European weaknesses, lower demand for short-cycle products in China and the U.S., and foreign exchange headwinds in the future.  Also stating a sense of confidence with maintaining a strong backlog with new platform wins across many of their different sectors.
Their guidance for sales and EPS were a little mixed, having lowered and narrowed their sales guidance outlook by 3% versus 2011 with a drop from $37.8-38.4B to $37.5-37.7B. However, they narrowed and increased their EPS guidance by 10% versus 2011 from $4.40-$4.55 to $4.45-4.50.

Following the earnings release, stock price closed today $62.49, a growth of 1.74% breaking through the $62.00 ceiling that seemed to be a resistance point for the year.   Following their acquisition Thomas Russell in their UOP segment, CEO Dave Cote placed a strong emphasis on natural gas investment which seems to be the way with the future outlook of coal depleting.

Different sectors: Q4 2012 outlook (primary causes)

Aerospace- 0%-(2)% reduction because of defense program ramp downs.

Automation and Controls Solution- 1%-3% growth because of increased investments for growth and   productivity yielding strong sales conversion.

Performance Materials and Technologies- 4%-6% growth because of UOP acquisition of Thomas Russell in the natural gas sector.

Transportation- (8)%-(12)% reductions because of EU light vehicle production down (–9%)

Honeywell Overall-
0%-1% ; Total $9.4-$9.6B      

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