Honeywell Tops Profit Estimates on Factory-Gear Demand

Honeywell International Inc. (HON) beat analysts’ second-quarter profit estimates, boosted by rising demand for factory automation equipment, and raised the lower end of its full-year forecast.

Quarterly earnings were $1.38 a share, Honeywell said today in a statement. The average of 17 estimates compiled by Bloomberg was $1.36. The Morris Township, New Jersey-based company also said it expects annual earnings of $5.45 to $5.55 a share, after a previous projection for at least $5.40.

Honeywell is benefiting from U.S. industrial output that expanded at a 5.5 percent annual rate last quarter, driving sales for products from handheld computers to portable gas detectors. The company also is tapping an energy boom in the U.S. on increasing hydraulic fracturing, or fracking, for oil and gas in shale formations.

“It was a good quarter with steady growth, good margin expansion,” Jim Corridore, an analyst at Standard & Poor’s Capital IQ in New York, said in a telephone interview. “We’re seeing improvement in manufacturing in the U.S. and abroad and that’s going to help” the automation business.

Sales rose 5.8 percent to $10.25 billion, beating the $10.18 billion average estimate. The gain was led by Automation and Control Solutions and Performance Materials and Technologies, which caters to the energy industry.

The shares rose 1.7 percent to $96.82 at the close in New York. They have gained 6 percent this year, as the S&P 500 climbed 7 percent.

Sales Outlook

Honeywell pared its forecast for annual sales to $40.2 billion to $40.4 billion, from $40.3 billion to $40.7 billion. The reduction reflects the sale of Honeywell’s brakes business, which was completed this month. That unit would have contributed revenue of about $300 million in the second half.

The company forecast third-quarter earnings per share of $1.37 to $1.42, trailing the $1.43 average of 16 analysts’ estimates compiled by Bloomberg. Sales are expected to be $9.9 billion to $10.1 billion, led by an increase of as much as 10 percent at the automation unit, Honeywell said in a slide presentation on its website. The average analyst estimate was $10.16 billion.

Chief Executive Officer Dave Cote has said he’s not counting on a big rebound in the global economy to meet five-year goals he laid out in March to boost annual sales to as high as $59 billion, from $39.1 billion last year.

Cote plans to accelerate acquisitions, pledging to spend $10 billion by 2018, and has reshuffled his business units. Honeywell said earlier this week it’s tucking its transportation unit, which focuses on turbochargers, into Aerospace and moving its business that monitors and controls fluids to Performance Materials and Technologies.

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

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

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