Honeywell (HON) Q1 Earnings & Revenues Outpace Estimates

Honeywell International Inc. HON reported better-than-expected first-quarter 2019 results. Adjusted earnings were $1.92 per share, surpassing the Zacks Consensus Estimate of $1.83. The bottom line also improved 12.9% year over year on the back of the company’s stellar operational performance during the quarter.

Honeywell’s first-quarter revenues came in at $8,884 million, surpassing the consensus estimate of $8,621 million. Notably, the top line declined 14.5% year over year. The fall was primarily attributable to impact of spin-offs of some of the company’s businesses in 2018. However, the top line improved 8% organically on the back of strength in its long-cycle businesses in U.S. defense, commercial aerospace and warehouse and process automation, and solid demand for commercial fire and security products.

Honeywell International Inc. Price, Consensus and EPS Surprise

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

Segmental Breakup

Revenues for Aerospace were $3,341 million, down 16% year over year. Honeywell Building Technologies revenues declined 43% to $1,389 million. Performance Materials and Technologies revenues were $2,572 million, up 2%. Safety and Productivity Solutions revenues improved 9% to $1,582 million.

Costs/Margins

The company’s total cost of sales in the reported quarter was $5,879 million, down 18.2% year over year. Selling, general and administrative expenses declined 7.6% to $1,363 million. Interest expenses and other financial charges were $85 million compared with $83 million a year ago.

Operating income margin for the first quarter was 18.5%, up 190 basis points year over year.

Balance Sheet/Cash Flow

Exiting the first quarter, Honeywell had cash and cash equivalents of $8,625 million compared with $9,287 million as of Dec 31, 2018. Long-term debt was $8,598 million, lower than $9,756 million recorded at the end of 2018.

During the first quarter, the company generated $1,134 million cash from operating activities, lower than $1,136 million reported a year ago. Capital expenditure was $141 million compared with $140 million incurred in the year-earlier quarter.

Adjusted free cash flow was $1,158 million, up 15.1%.

Outlook

Honeywell expects robust demand environment in commercial aerospace business to drive its revenues in the quarters ahead. It also expects greater operational excellence, stock buybacks and corporate tax benefits to boost profitability.

Concurrent with the earnings release, Honeywell revised its full-year guidance for 2019. The company anticipates earnings to be in the range of $7.90-$8.15 per share compared with $7.80-$8.10 guided earlier. It has raised revenue guidance for 2019 between $36.5 billion and $37.2 billion from $36-$36.9 billion predicted earlier.

Zacks Rank & Key Picks

Honeywell currently carries a Zacks Rank #3(Hold).

Some better-ranked stocks in the same space are Macquarie Infrastructure Company MIC, Federal Signal Corporation FSS and Danaher Corporation DHR. While Macquarie sports a Zacks Rank #1 (Strong Buy), Federal Signal and Danaher carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Macquarie delivered average earnings surprise of 0.51% in the trailing four quarters.

Federal Signal pulled off average positive earnings surprise of 21.65% in the trailing four quarters.

Danaher outpaced estimates in the last reported quarter by 3.89%.

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