Honeywell Beats Estimates (revised) - Analyst Blog
24 October 2011 - 6:24PM
Zacks
Honeywell International Inc.’s (HON) reported
third-quarter 2011 earnings results, reporting earnings per share
from continuing operations of $1.10, beating the Zacks Consensus
Estimate of 99 cents.
Total Revenue
Total revenue was $9.3 billion, an increase of 14% y/y.
Organically, total revenue was up 8% year over year, led by strong
performance in every market.
The company reported a revenue increase in all its segments.
Segment Performance
Aerospace segment sales climbed 8% year over year to $2.9 billion,
led by increased Commercial original equipment sales and raised
aftermarket volumes. This increase was partially offset by lower
military and government services sales. An increased volume,
favorable mix, and productivity net of inflation increased
operating margin by 80 bps to 17.3% during the quarter. However,
higher research and development costs partially affected the
segment margin.
Automation and Control Solutions segment sales increased by 14%
year over year to $3.9 billion, led by high product volumes and
Solution sales. The segment benefitted from good performance in the
emerging market, introduction of new products and favorable macro
trends. Sales in the quarter included 4% favorable impact from
foreign currency. The segment’s operating profit increased 15%
during the quarter.
Transportation System revenue of $960 million for the quarter,
increased by 22% year over year as a result of increased global
passenger and commercial vehicle Turbo volumes, new launches, and
favorable impact from foreign exchange of 9%. Augmented sales
volume and better productivity, increased the segment’s operating
profit by 32%. This was, however, partially offset by material
Inflation.
Specialty Material sales increased by 25% during the quarter to
$1.5 billion, led by good sales from UOP and development of
catalysts and new product applications in Advanced Materials.
Acquisition of the phenol plant also benefitted the segment
revenue. The segment operating profit increased by 31%, benefitting
from increased revenue, offset by inflation and unfavorable margin
impact from the phenol plant acquisition.
Income
The company incurred total SG&A expense of approximately $1.3
billion in the quarter versus approximately $1.1 billion in the
third quarter of 2010. Net income of the company was $863 million
compared with $596 million in the prior-year period.
Balance Sheet
Cash and cash equivalents were $3.9 billion with long-term debt of
$6.9 billion and shareowner’s equity of $11.8 billion.
Free cash flow in the quarter was $884 million, excluding pension
contributions of $400 million.
Outlook
The company’s result for the quarter is quite impressive as its
performance gained momentum in all business segment. Led by good
first-quarter 2011 performance and improving market condition,
Honeywell increased its 2011 sales and earnings per share
outlook.
Sales for the the year are expected to be in the range of $36.5
billion-$36.7 billion, up by approximately 13% over 2010. Sales
expectations for 2011 excludes the divested CPG business. Earnings
per share is expected to be in the range of $4.00-$4.05, up 33% to
35% over 2010. Free cash flow is expected to be about $3.5 billion.
Free cash flow expectation excludes US pension contribution.
Honeywell’s short-cycle businesses as well as its commercial
aerospace spares and residential and commercial retrofit businesses
are performing impressively well and are expected to support future
growth outlook of the company. The short-cycle businesses of the
company, like Turbo Technologies, Advanced Materials and ACS
Products, continues to perform well. The company’s long-cycle
backlog continued to be at near record levels.
Based in Morris Township, N.J., Honeywell International Inc. is a
Fortune 100 company providing technical and manufacturing support
to customers worldwide with aerospace products and services;
control technologies for buildings, homes and industry; automotive
products; turbochargers; and specialty materials. The major
competitors of Honeywell are
Borg Warner (BWA),
United Technologies Corp. (UTX) and
Johnson Controls Inc. (JCI).
We currently maintain our Neutral rating on Honeywell, with a Zacks
#3 Rank (Hold recommendation) over the next one to three
months.
(We are re-posting this article to correct an inaccuracy. The
original article, posted last week, should not be relied
upon.)
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