Honeywell Offers Cautious View, Trims Sales Outlook -- WSJ
October 18 2019 - 03:02AM
Dow Jones News
Adjusted earnings beat forecasts but company is cautious about
economy
By Thomas Gryta and Dave Sebastian
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (October 18, 2019).
Honeywell International Inc.'s third-quarter profit dropped 30%
because of spinoffs during the past year, and the industrial
conglomerate tempered its sales forecast as the group monitors
economic uncertainty.
The company -- with products as diverse as rubber boots and
water-processing systems -- said adjusted sales rose 10% in its
aviation business as that sector continues to thrive. Honeywell
nudged down the top end of its full-year sales outlook and boosted
the lower end of its adjusted earnings estimate.
"We remain somewhat cautious in our outlook given the continued
uncertainty in the macro environment, and the full year continues
to be solidly on track," Honeywell Chief Executive Darius Adamczyk
said on a Thursday conference call with analysts.
Shares in Honeywell rose 2.4% to $167.52 on Thursday.
Honeywell's third-quarter profit fell to $1.62 billion, or $2.23
a share, compared with $2.34 billion, or $3.11 a share, a year
earlier. Earnings increased 9% after adjustments, exceeding
analysts' expectations, according to FactSet. Sales declined 16% to
$9.09 billion, below analysts' expectations of $9.12 billion.
The declines come after Honeywell shed its home-security
products and transportation-systems businesses last year. The
company said organic sales, which exclude currency moves,
acquisitions and divestitures, rose 3%.
Honeywell said sales in its aerospace business, its largest
segment, declined 12% to $3.54 billion, but rose 10% on an organic
basis, citing strength in the defense and space portion of the
business. The division makes a range of aerospace systems and
technology, from electric power systems to engine controls.
The company again said it hasn't been hurt significantly by the
continued grounding of Boeing Corp.'s 737 MAX jets and doesn't
expect any impact for 2019. Honeywell remains "aligned to Boeing's
stated production schedule for the 737 MAX and we'll continue to
monitor the situation closely," Chief Financial Officer Greg Lewis
said on the conference call.
Honeywell, based in Charlotte, N.C., lowered the top end of its
2019 sales outlook to $36.9 billion, down from a prior forecast of
as much as $37.2 billion.
The company also increased the bottom end of its adjusted-profit
forecast, which is now $8.10 a share compared with $7.95 a share
previously.
Gordon Haskett analyst John Inch said Honeywell seems to be
showing signs of looming economic strain in its fourth-quarter
projection for per-share earnings of $2 to $2.05. He said the
projection is below analyst expectations of $2.06 a share.
Mr. Inch added that Honeywell is positioning itself to benefit
in a slowing economic environment.
Honeywell said it faces uncertainty in the broader economic and
industrial cycles, stressing that it is prepared for a range of
outcomes for the rest of the year. On its conference call, it made
similar assurances for 2020 as it predicted continuing economic
uncertainty, trade instability and risk from Europe and the U.K.'s
planned exit from the European Union.
Executives highlighted Honeywell's cash position and ability to
access capital for acquisitions or stock buybacks. While it
continues to talk up potential deals, Honeywell has shied away from
large transactions and mostly focused on buying its own shares,
spending $3.7 billion on buybacks so far this year.
"We have a robust playbook with multiple levers to protect
profit in the event of a market slowdown," Mr. Adamczyk said
Thursday, "and significant balance-sheet flexibility to generate
strong returns."
Micah Maidenberg contributed to this article.
Write to Thomas Gryta at thomas.gryta@wsj.com
(END) Dow Jones Newswires
October 18, 2019 02:47 ET (06:47 GMT)
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