Honeywell Falls on Sales as Cote-Led Profit Gain Not Enough

Updated on
  • Revenue decline seen as possible sign of U.S. industrial slump
  • Stock is `being painted with that broad brush,' investor says

Honeywell International Inc. fell after reducing its 2015 revenue forecast, adding to signs of weakness among U.S. manufacturers squeezed by a strong dollar and dwindling demand for oil-and-gas equipment.

While Chief Executive Officer Dave Cote boosted margins and delivered a third-quarter profit that beat estimates on Friday, investors focused on the drop in sales. Honeywell joined a decline among most companies in the Standard & Poor’s 500 Industrials Index, giving up an earlier gain.

U.S. factory output fell for a second month in September, a Federal Reserve report showed Friday, increasing investor concern that an industrial recession may be at hand, said Charlie Smith, chief investment officer at Fort Pitt Capital Group Inc., whose holdings including Honeywell shares. Honeywell was caught up in that selling pressure, he said.

“They’re getting painted with that broad brush of all industrials being down,” Smith said in a telephone interview. “There’s enough group-think out there that we’re going to be running off a cliff here before too long that it’s knocking the whole group back.”

Honeywell slid 1.5 percent to $97.03 at the close in New York. The shares fell 2.9 percent this year, outperforming the 6 percent decline for the S&P 500 Industrials Index.

2015 Forecast

Honeywell forecast full-year revenue of $38.7 billion, down from as much as $39.6 billion. Third-quarter sales fell 4.9 percent to $9.6 billion, Honeywell said Friday in a statement, missing the average projection of $9.85 billion.

The maker of gas detectors, jet engines and thermostats has been eliminating jobs at the fastest pace in more than a decade, shrinking the workforce by 3,040 positions in the first half. Cote has championed efficiency in his 13 years on the job, even as he balances mergers and acquisitions in a broad portfolio of brands.

“There’s obviously some pressure on sales, which has gained some attention,” said Jeff Windau, an analyst with Edward Jones & Co. in a telephone interview. Still, “they’re able to continue productivity and improve their operational performance.”  

Profit of $1.60 a share exceeded an average of $1.54 compiled by Bloomberg from analysts reports. Honeywell forecast fourth-quarter earnings per share of $1.58, lower than the average analyst estimate of $1.64, and said sales would probably be $10 billion to $10.2 billion. Analysts projected $10.3 billion.

(Updates with closing share prices in fifth paragraph.)
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