2nd UPDATE: Honeywell Cuts Full-Year Outlook On Weak Economy
April 24 2009 - 10:53AM
Dow Jones News
Honeywell International Inc.'s (HON) first-quarter net income
fell 38%, in line with what the company told investors in February.
But markets for business jets and automobiles, harder-hit by the
global recession than Honeywell expected, prompted the diversified
manufacturer on Friday to cut its full-year financial outlook.
During a conference call, Chairman and Chief Executive Dave Cote
said "I'm embarrassed about our (earnings per share) outlook
reduction, and it's not going to happen again." Cote said business
appears to be stabilizing, with market conditions not getting
worse.
Dave Anderson, chief financial officer, said the company's very
profitable commercial aerospace and turbo units have experienced
steeper-than-expected drops in demand. On the aerospace side,
business jet deliveries now are expected to decline more than 25%
this year - much worse than the 5% to 10% decline forecast in
February - as corporations and other customers defer their
purchases.
In an interview with Dow Jones Newswires, Anderson said
Honeywell, which makes jet electronics and other plane parts, has
seen demand for business jets falling across the board. "It's not
only corporate customers, but charter and fractional jet operators
and high net worth individuals who are deferring aircraft
deliveries."
He said he expects the market to remain weak for another year.
"It won't pick up until there are signs of greater consumer
confidence, and people aren't worried about losing their jobs,"
Anderson said. He said customers around the world are deferring
orders, pushing back delivery dates for six months or more.
As well, a cut in auto production has caused an unprecedented
decline in sales of Honeywell's turbochargers for auto engines,
Anderson said. Honeywell expects auto production to pick up in the
third quarter of this year, once inventories have fallen. Anderson
said Honeywell has won new contracts for work on diesel-fueled
cars, which will give business a boost when European auto sales
recover.
The company's automation and control solutions unit, for
homeowners and commercial building markets, was "a bright spot" in
the first quarter, Anderson said. The market for energy-efficient
heating and cooling and related products is relatively stable, and
Honeywell has maintained its $3 billion backlog of business, he
said.
Honeywell joins other manufacturers in lowering 2009 forecasts
to match weak consumer and industrial markets.
Cote told analysts that Honeywell had anticipated a difficult
first half, but it was adjusting its outlook because slow global
economic conditions are continuing. In the second half of the year,
earnings should improve, he said, as Honeywell benefits from
previous restructuring plans. "We're counting on no market
improvement," Cote added.
The company now expects 2009 earnings of $2.85 to $3.20 a share
on revenue of $32.3 billion to $33.2 billion, down from December's
earnings projection of $3.20 to $3.55 a share and February's
slightly narrowed revenue range of $33.3 billion to $35.1 billion.
"We're still pleased to anchor our forecast to the low end of the
previous range," Anderson said.
Honeywell posted net first-quarter income of $399 million, or 54
cents a share, down from $647 million, or 85 cents a share, a year
earlier.
Net sales decreased 15% to $7.57 billion, with product sales
down 19% and service sales edging up 0.7%.
While the company expects to see business improve in 2010,
Anderson said Honeywell faces higher pension expenses next year,
amounting to 50 cents a share.
Honeywell shares recently fell $1.23, or 3.8%, to $31.15.
-By Ann Keeton, Dow Jones Newswires; 312-750-4120;
ann.keeton@dowjones.com
(Kerry E. Grace contributed to this report.)