Honeywell Profit Meets Estimates as Cost Cuts Offset Weak Sales

  • Soft business-jet demand hurts aerospace parts business
  • Revenue forecast for 2017 is cut as dollar gains strength

Honeywell International Inc.’s profit matched analysts’ estimates as efficiency gains helped make up for soft corporate-jet demand and lower-than-expected sales of safety equipment.

“We expect the weakness in the business-jet market will persist over 2017,” Chief Financial Officer Tom Szlosek said in a conference call with analysts Friday.

Private-aircraft deliveries have slumped as concern over slow growth has damped demand in the U.S. and Europe. A drop in commodities prices has meanwhile crimped orders in emerging markets such as Russia and Brazil. Honeywell supplies engines for such aircraft as Bombardier Inc.’s Learjet 70 and Embraer SA’s Legacy 450.

Revenue this year will be $38.6 billion to $39.5 billion, Szlosek said, down from a December forecast of $39.2 billion to $40.1 billion. He blamed a strong dollar for the reduced outlook and said hedging has allowed the Morris Plains, New Jersey-based company to keep its 2017 profit forecast unchanged. Honeywell’s earnings forecast for the current quarter was in line with analysts’ estimates.

Fourth-quarter adjusted earnings rose to $1.74 a share from $1.53 a year earlier, Honeywell said in a statement. Sales were little changed at $9.99 billion. Analysts had predicted $10.1 billion, based on the average of estimates compiled by Bloomberg. 

Aerospace revenue fell 5 percent, after excluding the effects of acquisitions and foreign exchange. Adjusted sales dropped 6 percent in the Safety and Productivity Solutions unit.

Profit margins at the Performance Materials and Technologies, which contains energy-related businesses, widened by more than 5 percentage points. Sales climbed 5 percent after adjusting for items such as last year’s spinoff of a resins and chemicals operation.

Honeywell has benefited from oil prices stabilizing around $50 a barrel, which has freed up projects that had been delayed. Natural-gas prices averaged $3.17 per million British thermal units in the fourth quarter, almost a dollar more than a year earlier. Honeywell’s products include catalysts that improve refining efficiency and filters for natural gas.

The shares were little changed at $118.06 at 1:53 p.m. in New York. Honeywell’s stock climbed 20 percent during the 12 months ending Thursday, in line with the increase in the S&P 500 Index.

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