Honeywell Profit Beats Estimates on Energy-Related Sales
Honeywell International Inc. (HON)’s second-quarter profit topped analysts’ estimates as sales of security products increased and revenue at the unit selling turbochargers rose for the first time since the end of 2011.
The Morris Township, New Jersey-based manufacturer also raised the lower end of its 2013 forecast today, after reporting a 13 percent gain in quarterly net income to $1.02 billion, or $1.28 a share. That beat the $1.21 average of analysts’ estimates compiled by Bloomberg.
Honeywell, which like other industrial companies faces slowing global economic growth, has reported quarterly earnings that beat projections for more than four years by holding down costs and introducing products such as advanced natural-gas filters. Sales increased 2.7 percent, the slowest growth for a second quarter since 2009.
“Even though they had pretty sluggish sales growth overall, their cost-containment strategy plus their productivity improvements helped drive margins higher,” said Christian Mayes, a St. Louis-based analyst at Edward Jones & Co. who recommends buying the stock. “Any way you look at it, it was a fairly strong quarter.”
The shares gained 0.7 percent to $83.57 at the close in New York. They have risen 32 percent this year, outpacing the 19 percent advance in the Standard & Poor’s 500 Index.
General Electric Co. (GE) also reported earnings that exceeded estimates today, as demand for jet engines and oil-and-gas drilling equipment drove the order backlog to a record. Both companies “are starting to get a little momentum,” Mayes said.
Revenue at Honeywell’s transportation unit, which makes the auto turbochargers, rose 5.2 percent. Commercial vehicle sales improved in China and the decline in European light-vehicle production decelerated to 1 percent. Automation and Control Solutions -- the largest unit and maker of products from hand-held gas detectors to video-surveillance systems -- had sales of $4.07 billion, a 2.6 percent gain.
“Despite operating in a slow-growth macro-environment, we saw good organic growth in ACS’s Energy, Safety and Security business and in Turbo Technologies, both of which continue to outgrow the key end markets in which they compete,” Chief Executive Officer Dave Cote said in the statement.
The performance-materials division, which supplies the energy industry, had the highest sales growth among all divisions with 8.9 percent. Aerospace sales, hurt by defense cuts in the U.S., dropped 1 percent to $3 billion.
The company forecast third-quarter earnings of $1.20 to $1.25 a share, which implies a gain of as much as 4.2 percent from a year earlier. Analysts predicted $1.24 average on average. The company sees sales of $9.8 billion to $10 billion, led by the performance-materials business.
Yesterday, the U.K.’s Air Accidents Investigation Branch said a Honeywell beacon on Boeing Co. 787 jets should be deactivated. The agency is investigating a July 12 fire on a 787 at London’s Heathrow airport. The beacon, which is installed close to where the blaze occurred, should be shut off as a precautionary measure, the AAIB said.
Honeywell, which also makes cockpit controls and thermostats, raised the lower end of its 2013 earnings forecast by 5 cents to $4.85 a share. The top end was unchanged at $4.95.
Last quarter, Honeywell completed the purchase of RAE Systems Inc., a maker of portable gas and radiation detectors, for $340 million.
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