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Can Honeywell (HON) Surprise This Earnings Season?

Zacks Equity Research

Honeywell International Inc. (HON) is set to report first-quarter financial results before the market opens on Apr 17, 2014.

In the last-reported quarter, Honeywell’s delivered a positive earnings surprise of 1.64%. On an average, Honeywell has posted a 4.23% positive surprise in the last four quarters. Let’s see how things are shaping up for this quarter.

Factors to Consider This Quarter

Honeywell, a diversified conglomerate, is capitalizing on improving end markets, continued expansion in high-growth regions and consistent product innovation.

Its Automation and Control segment is rebounding and is expected to improve further owing to a recovering housing market and growth in commercial retrofit activity. Moreover, the company's short-cycle operations, particularly Energy, Safety and Security, and Turbo Technologies are gaining from recovering end markets. We expect these segments to boost Honeywell’s top line in the upcoming quarter. However, its Aerospace segment might be a drag on earnings as planned defense cuts, program delays and supply chain constraints hurt its profitability.

Honeywell’s subsidiary, UOP LLC, has recently been expanding its operations by providing technology and modular equipment to countries like China and Pakistan. The contracts are expected to be accretive to earnings in the coming quarters. Honeywell has been pursuing structural cost reduction strategies of late, and these should translate to healthy margin expansion and enhance profitability.

Earnings Whispers
Our proven model does not conclusively show that Honeywell is likely to beat earnings this quarter as it does not have the right combination of two key ingredients. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: Expected Surprise Prediction, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate currently stand at $1.26.

Zacks Rank: Honeywell’s Zacks Rank #3 (Hold) when combined with a 0.00% ESP makes surprise prediction difficult.

Other Stocks to Consider

Here are other companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this season:

Myriad Genetics Inc. (MYGN), with earnings ESP of +10.87% and a Zacks Rank #1 (Strong Buy).

RenaissanceRe Holdings Ltd. (RNR), with earnings ESP of +13.36% and a Zacks Rank #1.

E-Commerce China Dangdang Inc. (DANG), with earnings ESP of +33.33% and a Zacks Rank #1.

Read the Full Research Report on HON
Read the Full Research Report on RNR
Read the Full Research Report on MYGN
Read the Full Research Report on DANG

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