Honeywell International Inc.
) reported solid second quarter results on July 18, which marked
its 12th straight quarter with a positive earnings surprise. Strong
earnings momentum helped this diversified technology and
manufacturing company achieve a Zacks #2 Rank (Buy) on September 8.
In addition, the company has been consistently paying a quarterly
dividend that affirms a yield of 2.5%.
Second Quarter Results
Honeywell reported second-quarter 2012 earnings per share from
continuing operations of $1.14, which was 2.7% above the Zacks
Consensus Estimate of $1.11. The company had a robust quarter with
earnings increasing 14% year over year. Margins expanded by 70
Total revenue was $9.4 billion, an increase of 4% from the year-ago
quarter. Sales growth in the U.S. and the emerging economies were
driving factors, offsetting the weak performance of short cycle
businesses in Europe. Longer cycle businesses did well, including
commercial aerospace and UOP. Revenues missed the Zacks Consensus
Estimate of $9.5 billion.
The company reported revenue growth in three of its four segments.
Income from continuing operations was $1.2 billion in the quarter
versus $1.1 million in the second quarter of 2011, due to lower
SG&A and declines in interest and financial charges.
Management raised its earnings guidance for 2012, and now expects
earnings per share from continuing operations between $4.40 and
$4.55, compared with its previous guidance range of $4.35 to $4.55.
Total revenue is now expected between $37.8 billion and $38.4
billion, compared with the earlier projection of $38.0 billion to
The company expects to continue its strong performance in 2012 and
beyond, aided by strong positions in growing industries and
continuous efforts to undertake new ventures. For further
expansion, the company is focused on growth factors, such as
investments in new products, innovative technology, expansion in
emerging markets and initiatives in key processes.
The Zacks Consensus Estimate for 2012 increased a penny over the
last 60 days to $4.50, implying year-over-year growth of 18.7%. The
Zacks Consensus Estimate for 2013 is at $5.00, implying an 11.1%
increase over 2012.
As is evident from Honeywell's' chart below, consensus estimates
have trended upward over the past two quarters, due to
significantly higher positive earnings surprises.
Honeywell International has been paying consistent quarterly
dividends since 1970. The company has enough cash on its balance
sheet to cover the dividend payout for several years. The current
quarterly dividend of 0.373 cents per share affirms a yield of
Valuation Looks Compelling
Based on a 5-year EPS growth rate of 13.1%, Honeywell
International's PEG ratio comes to 1.0, which is on par with the
benchmark for a fairly priced stock.
Furthermore, Honeywell International currently trades at 13.8x its
forward earnings, a 5.5% discount to 14.6x for the industry and a
2.1% discount to 14.1x for the S&P 500.
The return on equity (ROE) for Honeywell is 29.2%, much higher than
the peer group average of 11.0%.
Headquartered in Morris Township, New Jersey, Honeywell
International is a diversified technology and manufacturing
company, serving customers worldwide with aerospace products and
services, control, sensing and security technologies for buildings,
homes and industry, turbochargers, automotive products, specialty
chemicals, electronic and advanced materials, process technology
for refining and petrochemicals and energy efficient products and
solutions for homes, business and transportation. The company has a
market cap of $46.5 billion.
HONEYWELL INTL (HON): Free Stock Analysis
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