Honeywell Beats Profit Estimates, Raises 2012 Forecast

Honeywell Profit Exceeds Estimates as 2012 Forecast Raised
Honeywell International Inc.'s head-up display system is seen on glass display visor during a prototype infrared technology demonstration between Morristown, New Jersey, and Rutland, Vermont. Photographer: Emile Wamsteker/Bloomberg

Honeywell International Inc., the maker of products from flight controls to work boots, raised its 2012 forecast after posting quarterly profit that beat analysts’ estimates on demand for aircraft parts and energy technology.

First-quarter net income rose 17 percent to $823 million, or $1.04 a share, from $705 million, or 88 cents, a year earlier, the Morris Township, New Jersey-based company said today in a statement. Analysts expected 99 cents, the average of 21 estimates compiled by Bloomberg.

Honeywell is benefiting from airlines bringing older planes back into active fleets, while oil prices topping $100 a barrel and a shale-gas drilling boom are driving demand for the company’s catalysts and refining processes. Per-share earnings for this year will be $4.35 to $4.55, compared with a previous forecast of $4.25 to $4.50, Honeywell said.

“We’ve seen good momentum in the U.S. and our key high growth regions, which is more than offsetting softness in Europe impacting our short-cycle businesses,” Chief Executive Officer Dave Cote in the statement.

Sales rose 7.3 percent to $9.31 billion, compared with a $9.15 billion average estimate by analysts. Honeywell narrowed its forecast for 2012 sales to $38 billion to $38.6 billion, from $37.8 billion to $38.9 billion.

Honeywell gained 2.4 percent to $59.39 at the close in New York. The shares have advanced 9.3 percent this year.

Aerospace Sales

Aerospace sales rose 9.4 percent to $2.95 billion, on gains of 22 percent from civil original equipment manufacturers and 16 percent for replacement equipment. Revenue from defense aviation declined 1 percent from a year earlier.

Sales for the Performance Materials & Technologies unit, which produces chemicals and provides supplies and service to the oil and gas industry, jumped 19 percent to $1.62 billion.

“Performance Materials continues to outperform expectations,” Robert Stallard, an RBC Capital Markets analyst in New York, said in a note. “Aerospace also had a good quarter.” Stallard rates Honeywell shares outperform.

Honeywell forecast sales gains this quarter of as much as 15 percent for performance materials and up to 8 percent for aerospace.

Revenue for Automation & Control Solutions, the largest unit, gained 3.6 percent to $3.79 billion. Its sales may rise as much as 4 percent this quarter, the company said.

Transportation Systems revenue declined 1.1 percent to $954 million. Honeywell said the unit, which sells auto turbochargers in Europe, may see sales fall as much as 9 percent this quarter from a year earlier.

‘Break From Conservatism’

In a presentation on its website, Honeywell forecast second-quarter adjusted earnings per share of $1.09 to $1.13. That compares with the $1.09 average of 20 analysts’ estimates compiled by Bloomberg.

The second-quarter forecast is “a break from conservatism and showing confidence in the outlook, while the nudge to 2012 guidance is also a plus,” Steve Tusa, an analyst at JPMorgan Chase & Co., said in a note. He rates the shares overweight.

Honeywell made pension and other postretirement benefit payments of $289 million during the first quarter. Honeywell has said it may make pension contributions of as much as $1 billion this year to close the gap of its underfunded plan.

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