Honeywell International Inc.
) reported third-quarter 2012 earnings results before the market
opened today. Earnings per share from continuing operations were
$1.20 in the reported quarter, above the Zacks Consensus Estimate
of $1.13. The company had a good quarter with its earnings
increasing by 38% year over year. Impressively, the operating
margins expanded by 360 bps.
Total revenue was $9.3 billion, almost flat year over year.
Organically the sales increased by 2%. The company's long- and
short-cycle businesses are performing very well. Further, new
products and expansion of operations in new regions are also
aiding revenue growth. All these positive factors were sufficient
to offset the weakness in European market and weak performance of
short cycle business in China and the U.S. Foreign exchange
headwinds were also a problem faced by Honeywell.
The company reported a revenue increase in three of its four
segments also climbed 4% 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 were approximately flat year over year to $4.0
billion, led by growth in volume and favorable impact of
acquisitions. The segment suffered from foreign currency
revenue of $863 million for the quarter, declined by 10% year
over year due to lower European light vehicle production and
aftermarket sales volume.
Performance Materials and Technologies
sales increased 1% during the quarter to $1.5 billion, led by
good sales from UOP and licensing. The segment revenue was
partially offset by unfavorable global end market conditions in
Fluorine Products and Resins and Chemicals pricing and low demand
in Asia and Europe for Specialty Products.
The company's income from continuing operation was $686
million in the quarter versus approximately $946 million in the
third quarter of 2011.
Aerospace operating margin expanded 90 bps to 19.1% during the
quarter; Automation and Control Solutions climbed 60 bps to
14.4%; Transportation System decreased 50 bps to 12.1% and
Performance Materials and Technologies increased 130 bps to
Cash and cash equivalents were $4.7 billion with long-term
debt of $6.3 billion and shareowners' equity of $13.2 billion.
Free cash flow in the quarter was $1.02 billion.
The company expects total revenue of $37.5 billion to $37.7
billion in 2012, up from the prior guidance of $37.8 billion to
$38.4 billion. Honeywell guided earnings from continuing
operations to be $4.45 to $4.50, up from the prior guidance of
$4.40 to $4.55.
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, N.J., Honeywell International Inc.
is a Fortune 100 company providing 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.
We currently maintain our Neutral rating on Honeywell,
corresponding to a Zacks #3 Rank (Hold recommendation) over the
next one to three months.
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