Honeywell Beats Earnings Estimate - Analyst Blog
April 19 2013 - 8:35AM
Zacks
Despite macroeconomic headwinds, Honeywell International
Inc. (HON) reported solid first quarter 2013 results with
earnings of $966 million or $1.21 per share compared to $825
million or $1.04 in the year-ago quarter, representing a growth of
16% on a per share basis. The earnings for the reported quarter
comprehensively beat the Zacks Consensus Estimate by 7 cents.
Revenue
Total revenue for first quarter 2013 was comparatively flat year
over year at $9.3 billion due to the continued macroeconomic
challenges, Total revenues failed to beat the Zacks Consensus
Estimate of $9.4 billion. Almost all the segments, except
Performance Materials and Technologies segment reported a decline
in sales.
Operating margins expanded 120 bps year over year.
Honeywell continued to benefit from investments in new products
and services like turbo gas launches in North America and China.
Also, the optimum mix of long- and short-cycle businesses was the
key driver for the growth.
Segment Performance
Aerospacesegment sales dipped 1% year over year
to $2.91 billion, primarily due to a decline in the Commercial,
Defense and Space business. However, segment profit increased 3%
year over year to $551 million on the back of commercial excellence
and superior productivity net of inflation, partially offset by
lower aftermarket volumes.
Margins in this segment came in at 18.9%, up 80 bps from year
over year.
Automation and Control Solutions segment sales
were flat year over year at $3.79 billion in the reported quarter,
as the rise in Energy, Safety, Security business was partially
offset by lower sales in Process Solutions and Business Solutions.
However, segment profit surged 7% to $523 million on the back of
commercial excellence and superior productivity net of inflation.
Margins for this segment also expanded 80bps year-over-year and was
reported at 21.8%.
Transportation Systems segment revenue of $914
million for the quarter declined 4% year over year due to 10% lower
European light vehicle production and aftermarket sales volume,
partially offset by rise in sales from new platform launches, like
turbo gas launches in North America and China.
In addition, segment profit plummeted 8% year over year to $111
million, primarily driven by lower sales volumes and the expenses
related to continuing projects to improve operational efficiency in
the Friction Materials business, partially offset by production
benefits. Margins for this segment came in at 12.1%, down 50bps
year over year.
Performance Materials and Technologies segment
sales increased 6% during the quarter to $1.7 billion due to the
acquisition of Thomas Russell, higher petrochemical catalyst
shipments and higher equipment sales in UOP, partially offset by
premeditated plant outages in Resins & Chemical and Fluorine
Products.
Segment profit increased by a healthy 17% to $374 million, due
to higher revenue at UOP and favorable price net of inflation,
partially offset by lower volume in Advanced Materials. Margins in
the segment expanded 200 bps year over year.
Balance Sheet
Cash and cash equivalents at quarter-end was $4.54 billion.
Long-term debt till the first quarter of 2013 was reported at $5.79
billion.
Cash Flow
Cash flow from operating activities improved significantly to
$341 million compared with $196 million in the year-ago
quarter.
Outlook
With strong growth in the first quarter earnings, Honeywell has
revised the low-end of earnings guidance for full year 2013 by five
cents from $4.75-$4.95 per share to $4.80 to $4.95.However, it has
revised it sales guidance for the full-year downwards to $38.8
- $39.3 billion compared with the prior guidance of $39.0 - $39.5
billion.
We remain encouraged by management’s continued effort to launch
new products and technologies and expand its business in new
geographical regions. Honeywell currently has a Zacks Rank #2
(Buy).
Some of the other stocks worth looking at within the sector are
China Merchants Holdings (CMHHY), with a Zacks
Rank #1(Strong Buy), Carlisle Companies Inc.
(CSL), Crane Co. (CR), carrying a Zacks Rank #2
(Buy) each.
CHINA MERCHANTS (CMHHY): Get Free Report
CRANE CO (CR): Free Stock Analysis Report
CARLISLE COS IN (CSL): Free Stock Analysis Report
HONEYWELL INTL (HON): Free Stock Analysis Report
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