Honeywell cuts revenue forecast as defense unit lags


Oct 18 (Reuters) - Honeywell International Inc onFriday reported lower-than-expected quarterly revenue, due inpart to supply problems at its defense unit, and the U.S.manufacturing conglomerate cut its full-year sales forecast.

Shares of Honeywell, which also makes cockpit electronicsand systems to manage the climate and security of largebuildings, fell more than 3 percent.

Third-quarter sales dropped 11 percent in the Defense &Space Division, which supplies parts and equipment to militaryand government projects. Honeywell attributed the decline mainlyto supply chain problems and the U.S. government sequestrationprogram, a series of spending cuts on federal projects.

"We just didn't get parts or components for a number of theproducts we needed to have in order to ship them, or we hadquality issues," Chief Financial Officer David Anderson said inan interview. "It's not lost sales; it's just delayed revenue."

The supply problems have largely been fixed and should notresurface, Anderson said.

Honeywell has been working to increase productivity and cutcosts in the past year, part of a wide-ranging plan to improveresults. As a result, the company raised the bottom end of itsfull-year profit outlook by 5 cents a share.

The company has been able to increase labor performance dueto its restructuring programs, in some cases doublingproductivity, Anderson said.

"It's in our DNA to aggressively manage our cost structure,"he said.

Honeywell now expects to earn $4.90 to $4.95 per share in2013. The top end of the forecast matches analysts'expectations, according to Thomson Reuters I/B/E/S.

The company, though, now expects 2013 revenue of $38.8billion to $39 billion, down from a previous forecast of $38.9billion to $39.3 billion.

The delayed closing of Honeywell's $600 million purchase ofmobile computing device maker Intermec was the major reason forthe lowered revenue forecast. The deal closed in September, butHoneywell had expected that to happen earlier in the year.

The company posted third-quarter net income of $990 million,or $1.24 per share, compared with $950 million, or $1.20 pershare, a year earlier.

Revenue rose 3 percent to $9.65 billion, but missedanalysts' expectations of $9.92 billion.

Chief Executive Officer David Cote said on a conference callwith investors that performance should continue to improve nextyear.

Shares of the Morris Township, New Jersey-based company weredown 3.1 percent at $84.21 in midday trading.

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