Honeywell International Inc.
) reported second-quarter 2012 earnings per share from continuing
operations of $1.14 a share, which was 2.7% above the Zacks
Consensus Estimate. The company had a robust quarter with earnings
increasing 14% year over year. Margins expanded by 70 bps.
Total revenue for the quarter was $9.4 billion, an increase of
4% year over year. Sales growth in the U.S. and the emerging
economies was a driving factor for the company, offsetting the weak
performance of short cycle businesses in Europe. Longer cycle
businesses were good performers, including commercial aerospace and
UOP. Revenues were below the Zacks Consensus Estimate of $9.5
The company reported revenue growth in three of its four
segment sales grew 8% year over year to $3.0 billion, led by
increased sales in commercial end markets. This increase was
partially offset by Defense and Space sales.
Automation and Control Solutions
segment sales increased 2% year over year to $4.0 billion, led by
increased revenue from Process Solutions and Building Solutions,
Distribution, Energy, Safety and Security all grew on organic
revenue of $900 million for the quarter, contracted 9% year over
year due to lower European vehicle production and aftermarket sales
Performance Materials and Technologies
sales increased 10% during the quarter to $1.6 billion, led by
robust sales from UOP and licensing and service sales, the phenol
plant acquisition and strong volumes in Resins & Chemicals.
This was partially offset by decreased UOP catalyst sales primarily
due to timing of deliveries and the impact of more challenging
global end market conditions for Fluorine Products.
The company's income from continuing operations was $1.2 billion
in the quarter versus $1.1 million in the first quarter of 2011 due
to lower SG&A and decline in interest and financial charges.
The operating margin expanded 85 basis points (bps) to 12.9% versus
12.1% in the prior year period.
Aerospace operating margin expanded a robust 260 bps to 18.6%
during the quarter; Automation and Control Solutions grew 50 bps to
13.3% and Performance Materials and Technologies margin expanded
260 bps to 22.6%. However, the Transportation System margin
contracted 30 bps to 12.7% year over year.
Cash and cash equivalents were $4.2 billion with long-term debt
of $6.3 billion and shareowners' equity of $12.1 billion. Net cash
provided by operating activities during the quarter was $973
Concurrent with the earning release, management raised its lower
end of earnings guidance. Earnings from continuing operations are
now expected in the range of $4.40 to $4.55 compared to its
previous guidance of $4.35 to $4.55 a share.
The company revised its revenue guidance for fiscal 2012. Total
revenue is now expected in the range of $37.8 billion to $38.4
billion compared to $38.0 billion to $38.6 billion stated
The company expects to continue its strong performance in 2012
and ahead, aided by strong hold in good industries and continuous
effort to undertake new ventures. For further expansion, the
company is focused on growth factors, such as investments in new
products, technology demarcation, expansion in the emerging markets
and initiatives in key processes.
Honeywell's short-cycle businesses as well as its commercial
aerospace spares and residential and commercial retrofit businesses
are performing impressively and are expected to support the
company's future growth outlook.
However, a change in the U.S. government's defense and aerospace
funding could adversely impact sales of Aerospace's defense and
space-related products and services.
Based in Morris Township, New Jersey, Honeywell International
Inc. provides 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
United Technologies Corp.
Johnson Controls Inc.
Honeywell currently has a Zacks Rank of #3 which implies a short
term Hold rating on the stock.
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