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Honeywell (HON) Q1 Earnings Beat on Solid Top-Line Growth

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Honeywell International Inc. HON posted impressive first-quarter 2018 results with a year-over-year surge in revenues and adjusted earnings.The company’s adjusted earnings of $1.95 a share surpassed the Zacks Consensus Estimate of $1.89 by 3.2%. Notably, the reported figure increased 17.5% on a year-over-year basis.

Operational Details

Honeywell’s first-quarter revenues came in at $10,392 million, up 9.5% year over year. The top line also exceeded the Zacks Consensus Estimate of $9,936 million. This impressive performance can primarily be attributed to higher revenues accrued from each of the four segments of the company.

Honeywell International Inc. Price, Consensus and EPS Surprise

Honeywell International Inc. Price, Consensus and EPS Surprise | Honeywell International Inc. Quote

Total segment profit was $1,995 million compared with $1,789 million in the prior-year period. Overall segment profit margin improved to 19.2% from 18.8% in the year ago.

Also, operating income increased to $1,801 million from $1,534 million in the year-ago quarter. Operating income margin in the first quarter was 16.6%, up 40 basis points (bps) year over year.

Operating Costs

In the reported quarter, the company’s total cost of goods sold totaled $7,193 million compared with $6,529 million in the prior-year period. Selling, general and administrative expenses came in at $1,475 million, up 3.7% year over year. Interest expenses and other financial charges were $83 million compared with $75 million in the year ago.

Segment in Details

Aerospace sales were $3,977 million in the reported quarter, up 12.2% year over year. This impressive performance can be attributable to commercial OE and U.S. defense growth. Moreover, strength in the light vehicle gas and commercial vehicle turbochargers in Transportation Systems proved conductive to the segment’s growth.

Home and Building Technologies revenues came in at $2,433 million, up 7.2% year over year. The upside was driven by solid demand for residential thermal solutions and thermostats.  Also, continued strength in ADI globally as well as strong backlog conversion in the energy vertical within Building Solutions supported the segment’s growth.

Performance Materials and Technologies revenues were $2,534 million, up 7.7% year over year. The improvement was backed by solid short-cycle demand in thermal solutions, smart energy, maintenance services as well as field instrumentation in Process Solutions.

Safety and Productivity Solutions’ revenues came in at $1,448 million, up 9.4% year over year. The segment’s sales were up on the back of solid organic sales and growth in orders at Intelligrated as well as higher volumes in Sensing.

Balance Sheet

Cash and cash equivalents as of Mar 31, 2018 were $7,897 million compared with $7,710 million in the prior-year period. Long-term debt as of Mar 31, 2018 came in at $12,738 million compared with $12,573 million as of Dec 31, 2017.

Net cash provided from operating activities for three months (ended Mar 31, 2018) was $1,136 million compared with $940 million in the year ago.

Outlook

Concurrent with the earnings release, Honeywell revised its full-year earnings guidance for 2018. The company anticipates earnings to be in the range of $7.85-$8.05 per share compared with $7.75-$8.00 guided earlier.

Zacks Rank & Key Picks

Honeywell has a Zacks Rank #3 (Hold). Some better-ranked stocks in the same space include Raven Industries, Inc. RAVN, Crane Company CR and Danaher Corporation DHR, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Raven Industries has a modest earnings surprise history. The company exceeding estimates thrice in the trailing four quarters, with an average beat of 20.2%.

Crane has an impressive earnings surprise history. The company outpaced estimates in the trailing four quarters, with an average beat of 2.6%.

Danaher has an excellent earnings surprise history. The company surpassed estimates in the trailing four quarters, with an average beat of 4.1%.

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