Honeywell Cuts 2012 Outlook on Weak Demand in Europe

Honeywell International Inc. (HON) reported a third-quarter profit that beat analysts’ estimates and cut its full-year sales forecast on weaker demand for aerospace parts and falling auto production in Europe.

The Morris Township, New Jersey-based maker of turbochargers and cockpit controls now sees 2012 sales of as much as $37.7 billion, down from a range of $37.8 billion to $38.4 billion, according to a statement today.

After increased production of commercial airplanes drove aerospace sales last quarter, Honeywell anticipates a revenue drop of as much as 2 percent in the division this quarter, amid weaker aftermarket sales and defense cuts. Honeywell, facing recessions in Europe and lower demand for short-cycle products in China, joined industrial peers General Electric Co. and Parker Hannifin Corp. (PH) in cutting forecasts today.

“The outlook for the fourth quarter and into 2013 is pretty cautious,” Robert Stallard, an analyst with RBC Capital Markets in New York, said in a note today about Honeywell. “Given the limited visibility in shorter cycle areas like Transportation we view this conservatism as warranted.”

Honeywell advanced 2.1 percent to $62.73 at 10:46 a.m. in New York. The shares had gained 13 percent this year through yesterday.

Net income rose 10 percent to $950 million, or $1.20 a share, from $862 million, or $1.10, a year earlier, when Honeywell recorded a 23-cent gain from a unit sale. That beat the $1.14 average of analysts’ estimates compiled by Bloomberg.

Profit margin from business segments increased 1.1 percentage points to 15.8 percent. A lower tax rate of 22.7 percent, compared with 23.2 percent a year earlier, added about 6 cents to earnings per share, Stallard said.

‘Strong Earnings Growth’

“We delivered strong earnings growth and margin expansion while continuing our investments, our seed-planting for the future, despite a deceleration across a number of our end markets,” Chief Executive Officer Dave Cote said on a conference call with analysts.

Third-quarter sales advanced 0.5 percent to $9.34 billion, missing the $9.5 billion average prediction.

The company narrowed its full-year target for earnings per share to $4.45 to $4.50 from a previous range of $4.40 to $4.55. Honeywell forecast fourth-quarter adjusted earnings per share of $1.13 to $1.18, according to a slide presentation on its website. That’s lower than the $1.19 average of estimates.

For 2013, “we are planning for a continued challenging macro environment,” Cote said in the statement.

Sales in the transportation unit may slump as much as 12 percent in the fourth quarter, Honeywell said.

A boom in U.S. natural gas drilling of shale rock formations and global demand for petrochemicals spurred profit at the UOP unit, which provides technology that helps convert coal to plastics and produce high-octane gasoline.

“We continue to be encouraged by the commercial aerospace outlook, increasing infrastructure spending, and oil and gas investments,” Cote said.

To contact the reporter on this story: Thomas Black in Dallas at tblack@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net

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