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Honeywell (HON) to Post Q2 Earnings: Another Beat in Store?

Honeywell International Inc.HON is slated to report second-quarter 2018 results on Jul 20, before the market opens.

The company pulled off an average positive earnings surprise of 1.49% over the preceding four quarters. Notably, its adjusted earnings of $1.95 per share outpaced the Zacks Consensus Estimate of $1.89 in the last reported quarter.

Our proven model shows that Honeywell's earnings will likely beat estimates in the to-be-reported quarter as well.

Why a Likely Positive Surprise?

Honeywell has the right combination of two key ingredients -

Zacks Rank & ESP: Honeywell's favorable Zacks Rank #2 (Buy), when combined with an Earnings ESP of +0.31%, predicts a likely earnings beat.

The company's Most Accurate estimate of $2.02 per share is a penny higher than the Zacks Consensus Estimate.

You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

It should be noted that we caution against stocks with a Zacks Ranks #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.

What's Driving the Better-Than-Expected Earnings?

Elevated demand across all end-markets and innovative product-launching initiatives are expected to drive Honeywell's revenues in the quarters ahead.

Continued strength in the Transportation Systems business, and sturdier U.S. defense and commercial original equipment demand are expected to bolster the company's Aerospace segment revenues, going forward. The Zacks Consensus Estimate for the segment's revenues in second-quarter 2018 is currently pegged at $3,962 million, higher than $3,546 million reported in the last reported quarter.

A robust Building Solutions business, as well as continued growth in residential thermal solutions and thermostats' demand will likely drive the near-term top-line performance of the Home and Building Technologies segment. The Zacks Consensus Estimate for the segment's second-quarter revenues is currently pegged at $2,557 million, higher than $2,269 million reported in the preceding quarter.

Growth in the company's Process Solutions business and higher short-cycle demand in Thermal Solutions trade will boost the Performance Materials and Technologies segment's top-line growth. The Zacks Consensus Estimate for the segment's second-quarter revenues is currently pegged at $2,741 million, higher than $2,353 million reported in the preceding quarter.

Furthermore, Honeywell's Safety and Productivity Solutions segment is expected to reflect the positive impact of increased sales volume and higher orders.

Honeywell anticipates generating organic revenues of 3-4% in the April-June quarter.

The company believes productivity and volume leverage, ongoing investments in commercial excellence and the recently-accomplished restructuring projects will strengthen its profitability in the quarters ahead. Notably, reduced corporate tax rates, as well as tax benefits to be secured from overseas cash repatriation, will likely drive margin expansion, going forward.

Honeywell's results are anticipated to reflect margin expansion of 30-50 basis points in the to-be-reported quarter. The company's second-quarter adjusted earnings are projected at $1.97-$2.03 per share.

The Zacks Consensus Estimates for second-quarter 2018 operating profit of Honeywell's Aerospace, Home and Building Technologies, Performance Materials and Technologies and Safety and Productivity Solutions segments are currently pegged at $901 million, $431 million, $590 million and $244 million, respectively, higher than the corresponding tallies of $796 million, $377 million, $483 million and $194 million recorded in the prior quarter.

Other Stocks to Consider

Here are some other stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat:

Atkore International Group Inc. ATKR sports a Zacks Rank #1 (Strong Buy) and has an Earnings ESP of +1.49%. You can see the complete list of today's Zacks #1 Rank stocks here .

United Technologies Corporation UTX carries a Zacks Rank of 3 (Hold) and has an Earnings ESP of +1.08%.

Eaton Corporation plc ETN carries a Zacks Rank of 2 and has an Earnings ESP of +1.03%.

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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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