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Will Supply-Chain & Cost Woes Mar Honeywell (HON) Q4 Earnings?

Honeywell International Inc. HON is scheduled to report fourth-quarter 2022 financial numbers on Feb 2, before market open.

The Zacks Consensus Estimate for the company’s fourth-quarter earnings has been revised downward by a penny in the past 60 days. However, the company has an impressive earnings surprise history, having outperformed the Zacks Consensus Estimate in each of the preceding four quarters, the average beat being 2.7%.

Let’s see how things are shaping up for Honeywell this earnings season.

Honeywell International Inc. Price and EPS Surprise

Honeywell International Inc. Price and EPS Surprise
Honeywell International Inc. Price and EPS Surprise

Honeywell International Inc. price-eps-surprise | Honeywell International Inc. Quote

Factors to Note

Honeywell’s fourth-quarter results are expected to reflect strength in Aerospace, Performance Materials and Technologies and Honeywell Building Technologies. Pricing actions and cost-control measures are expected to have supported margin performance.

Strong commercial aftermarket demand owing to a recovery in commercial flight hours is likely to have aided the Aerospace segment’s performance. The Zacks Consensus Estimate for Aerospace net sales in the fourth quarter indicates an 8.4% increase from the year-ago reported number. We expect the company’s Aerospace revenues to rise 6.2% from the year-ago reported number.

Strong fire products and building management system sales are expected to have driven performance of the Building Technologies segment. The consensus mark for Building Technologies revenues in the fourth quarter hints at a 12.1% jump from the year-ago reported number. We expect segmental revenues to rise 18.7% from the year-ago reported number.

Strong demand in the Marine Products business and strength in gas processing orders are expected to have boosted revenues at the Performance Materials and Technologies segment. The Zacks Consensus Estimate for Performance Materials and Technologies segment suggests a 7.5% increase from the year-ago reported number. We expect the same to inch up 3.8% from the year-ago reported number.

However, lower personal protective equipment and warehouse automation volume are likely to have impacted Safety and Productivity Solutions sales in the to-be-reported quarter. The Zacks Consensus Estimate for Safety and Productivity Solutions sales hints at a 3.5% dip from the year-ago reported number. We expect the same to dip 0.2% from the fourth quarter of 2021.

Softness in volumes due to supply-chain constraints, particularly related to the availability of semiconductors, is likely to have weighed on Honeywell’s fourth-quarter performance. Additionally, raw material cost inflation and high selling, general and administrative expenses might have dented the company’s bottom line. Foreign currency headwinds might have also hampered the bottom line.

What Does the Zacks Model Say?

Our proven model does not conclusively predict an earnings beat for Honeywell this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates, which is not the case here, as elaborated below. You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings ESP: Honeywell has an Earnings ESP of -1.88% as the Most Accurate Estimate is pegged at $2.44, lower than the Zacks Consensus Estimate of $2.49. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Honeywell currently carries a Zacks Rank #3.

Highlights of Q3 Earnings

Honeywell’s third-quarter 2022 adjusted earnings of $2.25 per share surpassed the Zacks Consensus Estimate of $2.16. The bottom line improved 11.4% year over year. Total revenues of $8,951 million missed the Zacks Consensus Estimate of $9,075.3 million. The top line increased 5.6% from the year-ago quarter due to strength in Honeywell Building Technologies, Performance Materials and Technologies and Aerospace segments.

Stocks to Consider

Here are some companies that you may want to consider as, according to our model, these have the right combination of elements to beat on earnings this reporting cycle.

Caterpillar CAT has an Earnings ESP of +1.14% and a Zacks Rank #3. The company is scheduled to release fourth-quarter earnings numbers on Jan 31.

The Zacks Consensus Estimate for Caterpillar’s fourth-quarter earnings has been revised upward by 17.6% in the past 90 days. CAT pulled off a trailing four-quarter earnings surprise of 14.7%, on average.

IDEX Corporation IEX has an Earnings ESP of +2.96% and a Zacks Rank #2. The company is slated to release fourth-quarter financial numbers on Jan 31.

The Zacks Consensus Estimate for IDEX’s fourth-quarter earnings has been revised upward by 1.5% in the past 90 days. IEX delivered a trailing four-quarter earnings surprise of 5.7%, on average.

Xylem XYL has an Earnings ESP of +2.10% and a Zacks Rank #3. The company is set to release fourth-quarter results on Feb 7.

The Zacks Consensus Estimate for Xylem’s fourth-quarter earnings has been revised upward by a penny in the past 90 days. XYL pulled off a trailing four-quarter earnings surprise of 13.3%, on average.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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