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Honeywell (HON) Beats on Q3 Earnings, Lowers 2018 EPS View

Honeywell International Inc.HON reported better-than-expected results for third-quarter 2018.

Earnings & Revenues

Adjusted earnings in the reported quarter were $2.03 per share, outpacing the Zacks Consensus Estimate of $1.99. The bottom line also improved 16.7% year over year. This upside primarily stemmed from the company's stellar operational performance during the reported quarter.

Revenues of $10,762 million in the third quarter surpassed the Zacks Consensus Estimate of $10,731 million. The top line also grew 6.3% year over year. Top-line numbers improved 7% organically on the back of stronger sales generated from the company's Aerospace, and Safety and Productivity Solutions businesses.

Segmental Break-Up

Revenues in the Aerospace segment were $4,030 million, up 10% year over year. The top-line performance of the Home and Building Technologies segment improved 2% year over year to $2,517 million. Performance Materials and Technologies segment's revenues in the third quarter were $2,640 million, up 3% year over year. Safety and Productivity Solutions revenues improved 11% year over year to $1,575 million.

Honeywell International Inc. Price, Consensus and EPS Surprise

Honeywell International Inc. Price, Consensus and EPS Surprise | Honeywell International Inc. Quote

Costs/Margins

The company's total cost of sales in the reported quarter was $7,556 million, up 7.1% year over year. Selling, general and administrative expenses remained flat year over year at $1,524 million. Interest expenses and other financial charges were $99 million compared with $81 million witnessed in the comparable period last year.

Operating income margin in the third quarter was 15.6%, up 40 basis points year over year.

Balance Sheet/Cash Flow

Exiting the quarter, Honeywell had cash and cash equivalents of $9,803 million, higher than $7,059 million recorded as of Dec 31, 2017. Long-term debt was $14,059 million, higher than $12,573 million recorded at the end of 2017.

During the reported quarter, the company generated $1,887 million cash from operating activities, higher than $1,407 million recorded in the year-ago period. Capital expenditure in the July-September quarter was $183 million, lower than $212 million incurred in the year-earlier quarter.

Adjusted free cash flow in the reported quarter was $1,809 million, up 51% year over year.

During the reported quarter, Honeywell repurchased common stock worth $300 million. The company also increased its dividend by 10% - marking the ninth double-digit hike since 2010.

Outlook

Honeywell is poised to augment its near-term revenues and profitability on the back of robust end-market demand. This Zacks Rank #3 (Hold) stock is poised to grow on the back of investments, greater operational efficacy and stronger demand for its diversified products. Moreover, Honeywell is on track to boost its shareholders' remuneration over time.

The company lowered its earnings view for 2018 from $8.10-$8.20 per share to $7.95 - $8.00. The outlook is revised after considering the impact of 27 cents per share of net earnings dilution from the separation of Garrett Motion Inc. GTX and Resideo Technologies, Inc. Garrett started operating as a stand-alone company from Oct 1. Resideo spin-off is anticipated to be closed by Oct 29.

Stocks to Consider

Two better-ranked stocks from the same space are listed below:

Macquarie Infrastructure Company MIC currently sports a Zacks Rank #1 (Strong Buy). The company pulled off a positive average earnings surprise of 8.05% in the past four quarters.

You can see the complete list of today's Zacks #1 Rank stocks here .

United Technologies Corporation UTX presently carries a Zacks Rank #2 (Buy). The company pulled off a positive average earnings surprise of 7.31% in the past four quarters.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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