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Will Honeywell (HON) Q4 Earnings Beat on Organic Growth? - Analyst Blog

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Honeywell International IncHoneywell International Inc (HON) is scheduled to report its fourth-quarter 2014 results before the opening bell on Jan 23. In the last reported quarter, quarterly earnings beat the Zacks Consensus Estimate by a couple of cents. Let's see how things are shaping up for this announcement.

Honeywell International Inc ( HON ) is scheduled to report its fourth-quarter 2014 results before the opening bell on Jan 23. In the last reported quarter, quarterly earnings beat the Zacks Consensus Estimate by a couple of cents. Let's see how things are shaping up for this announcement.

Factors to Consider

Honeywell continues to launch products and technologies in order to drive organic growth and expand its business in new geographical regions. The company's diligent focus on working capital management, free cash flow generation and a conservative balance sheet remain key positive attributes. With a flexible yet disciplined focus on cost and productivity, Honeywell remains positive and expects organic sales growth acceleration throughout the year.

As per Honeywell's business aviation outlook, it is expecting up to 9,450 new business jet deliveries worth $280 billion from 2014 to 2024. The 2014 Honeywell outlook reflects an approximate 7% to 8% increase in projected delivery value year over year.

For full-year 2015, Honeywell expects organic sales growth of 4% year over year to $40.5 billion-$41.1 billion. Segment operating margins are expected to improve 100-130 bps over 2014 levels to 17.6%-17.9%, leading to high single digit to double-digit earnings growth of 8%-12% to $5.95-$6.15 per share. This in turn will enable the company to pursue strategic mergers and acquisitions, engage in opportunistic share buybacks and maintain competitive dividends.

Although the company's proactive restructuring initiatives have positioned it to navigate better than many of its peers, it is yet to witness signs of stabilization in a number of its major end markets. A change in the U.S. government's defense and aerospace funding could also adversely impact sales of Aerospace's defense and aerospace-related products and services.

Earnings Whispers

Our proven model does not conclusively show that Honeywell will beat the Zacks Consensus Estimate in this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. This is not the case here as you will see below.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate is pegged at 0.00%. This is because both the Most Accurate estimate and Zacks Consensus Estimate currently stand at $1.42

Zacks Rank: Honeywell's Zacks Rank #3, when combined with 0.00% ESP, makes surprise prediction difficult. Note that stocks with Zacks Rank #1, #2 and #3 have a significantly higher chance of beating earnings.

We caution against stocks with Zacks Ranks #4 and #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Other Stocks to Consider

Here are some companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat in the imminent future.

Arch Capital Group Ltd. ( ACGL) , earnings ESP of +1.92% and a Zacks Rank #1

Century Aluminum Co. ( CENX ), earnings ESP of +7.81% and a Zacks Rank #1.

Horsehead Holding Corp. ( ZINC ), earnings ESP of +8.33% and a Zacks Rank #3

(HON) is scheduled to report its fourth-quarter 2014 results before the opening bell on Jan 23. In the last reported quarter, quarterly earnings beat the Zacks Consensus Estimate by a couple of cents. Let's see how things are shaping up for this announcement.

Factors to Consider

Honeywell continues to launch products and technologies in order to drive organic growth and expand its business in new geographical regions. The company's diligent focus on working capital management, free cash flow generation and a conservative balance sheet remain key positive attributes. With a flexible yet disciplined focus on cost and productivity, Honeywell remains positive and expects organic sales growth acceleration throughout the year.

As per Honeywell's business aviation outlook, it is expecting up to 9,450 new business jet deliveries worth $280 billion from 2014 to 2024. The 2014 Honeywell outlook reflects an approximate 7% to 8% increase in projected delivery value year over year.

For full-year 2015, Honeywell expects organic sales growth of 4% year over year to $40.5 billion-$41.1 billion. Segment operating margins are expected to improve 100-130 bps over 2014 levels to 17.6%-17.9%, leading to high single digit to double-digit earnings growth of 8%-12% to $5.95-$6.15 per share. This in turn will enable the company to pursue strategic mergers and acquisitions, engage in opportunistic share buybacks and maintain competitive dividends.

Although the company's proactive restructuring initiatives have positioned it to navigate better than many of its peers, it is yet to witness signs of stabilization in a number of its major end markets. A change in the U.S. government's defense and aerospace funding could also adversely impact sales of Aerospace's defense and aerospace-related products and services.

Earnings Whispers

Our proven model does not conclusively show that Honeywell will beat the Zacks Consensus Estimate in this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. This is not the case here as you will see below.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate is pegged at 0.00%. This is because both the Most Accurate estimate and Zacks Consensus Estimate currently stand at $1.42

Zacks Rank: Honeywell's Zacks Rank #3, when combined with 0.00% ESP, makes surprise prediction difficult. Note that stocks with Zacks Rank #1, #2 and #3 have a significantly higher chance of beating earnings.

We caution against stocks with Zacks Ranks #4 and #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Other Stocks to Consider

Here are some companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat in the imminent future.

Arch Capital Group Ltd. (ACGL), earnings ESP of +1.92% and a Zacks Rank #1

Century Aluminum Co. (CENX), earnings ESP of +7.81% and a Zacks Rank #1.

Horsehead Holding Corp. (ZINC), earnings ESP of +8.33% and a Zacks Rank #3

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HONEYWELL INTL (HON): Free Stock Analysis Report

CENTURY ALUM CO (CENX): Free Stock Analysis Report

HORSEHEAD HLDG (ZINC): Free Stock Analysis Report

ARCH CAP GP LTD (ACGL): Free Stock Analysis Report

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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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