Honeywell (HON) to Post Q3 Earnings: Another Beat in Store?
Honeywell International Inc. HON is scheduled to report third-quarter results on Oct 19, before the opening bell.
The company has delivered an average positive earnings surprise of 2.44% over the trailing four quarters. Notably, Honeywell’s second-quarter 2018 adjusted earnings of $2.12 per share surpassed the Zacks Consensus Estimate of $2.01 by 5.5%.
Our proven model shows that the company is likely to beat estimates in the to-be-reported quarter.
Why a Likely Positive Surprise?
Honeywellhas the right combination of the two key ingredients.
Zacks ESP: Honeywell currently has an Earnings ESP of +0.11%. The Zacks Consensus Estimate for the company’s earnings in the third quarter is pegged at $1.99 per share.
Honeywell International Inc. Price and EPS Surprise
Honeywell International Inc. Price and EPS Surprise | Honeywell International Inc. Quote
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Honeywell’s favorable Zacks Rank #3 (Hold), when combined with a positive Earnings ESP, predicts a likely earnings beat.
Per our proven model, a stock needs to have a combination of a positive Earnings ESP, and a Zacks Rank #1 (Strong Buy) or 2(Buy) or at least 3, for a likely earnings beat.
However, we caution against stocks with a Zacks Ranks #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.
What’s Driving the Stellar Earnings?
Honeywell anticipates stronger commercial aviation, original equipment sales and higher shipment volumes to bolster Aerospace segment’s revenues in the third quarter. Additionally, sturdier Defense & Space and Transportation Systems businesses are expected to strengthen the segment’s performance in the to-be-reported quarter. The Zacks Consensus Estimate for the segment's revenues in the third quarter is currently pegged at $3,963 million, higher than $3,601 million reported in the year-ago period.
A robust Building Solutions business, continued growth in residential thermal solutions and thermostats' demand is likely to drive top-line performance of the Home and Building Technologies segment in the quarter under review. The Zacks Consensus Estimate for the segment's third-quarter revenues is currently pegged at $2,563 million, higher than $2,546 million reported in the preceding quarter.
Growth in the company's Process Solutions and Advanced Materials businesses as well as higher short-cycle demand in Thermal Solutions trade are expected to drive revenues of Honeywell’s Performance Materials and Technologies segment in the third quarter. The Zacks Consensus Estimate for the segment's third-quarter revenues is currently pegged at $2,694 million, higher than $2,329 million reported in the year-ago tally.
Growth in new orders, new commercial excellence initiatives conducted in the e-commerce area and stronger demand for new Android-based mobility product offerings is likely to bolster revenues of Safety and Productivity Solutions segment in the third quarter.
Honeywell projects generating organic sales growth within the range of 5-7% in the July-September quarter.
The company believes that productivity and volume leverage, ongoing investments and the recently-accomplished restructuring projects will strengthen its profitability in the quarters ahead. Notably, reduced corporate tax rates and tax benefits to be secured from overseas cash repatriation, is likely to drive margin expansion, going forward.
The company’s results are anticipated to reflect margin expansion of 30-50 basis points in the to-be-reported quarter. Notably, Honeywell third-quarter adjusted earnings are projected at $1.95-$2.00 per share, reflecting growth of 11-14%.
The Zacks Consensus Estimate for third-quarter operating profit of Honeywell's Aerospace and Performance Materials and Technologies segments are pegged at $884 million and $573 million, respectively, higher than the corresponding tallies of $663 million and $503 million recorded in the prior quarter. Meanwhile, the Zacks Consensus Estimate for Home and Building Technologies segment's third-quarter operating profit is pegged at $442 million, higher than $427 million reported in the preceding quarter.
Other Stocks to Consider
Here are some other stocks in the Zacks Conglomerates sectorthat you may want to consider, as our model shows that these too have the right combination of elements to post an earnings beat:
United Technologies Corporation UTX has a Zacks Rank #2 and an Earnings ESP of +0.28%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Danaher Corporation DHR has a Zacks Rank #3 and an Earnings ESP of +0.86%.
ITT Inc. ITT has a Zacks Rank #3 and an Earnings ESP of +0.65%.
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