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Honeywell International Reports 3rd-Quarter Results

Honeywell International Inc. (NYSE:HON) released third-quarter results before the opening bell on Oct. 17. While the company beat earnings expectations, revenue disappointed.

Snapshot of the quarter

The industrial conglomerate recorded adjusted earnings of $2.08 per share, which increased 9% from the prior-year quarter and beat estimates by 7 cents. Quarterly revenue declined 16% on a year-over-year basis to $9.08 billion, which fell short of the $9.15 billion forecasted. The company attributed the decrease to spinning off some of its businesses in 2018.

At the end of the quarter, the company had cash and cash equivalents of $10.91 billion and $11.1 billion in long-term debt.

"We continue to deliver strong results and returns for our shareowners, even with the ongoing uncertainty in the macroeconomic environment," CEO Darius Adamczyk said. "Organic sales growth of 3% was driven by strength across Aerospace, continued demand for commercial fire products in Building Technologies, and broad-based growth in Process Solutions. In addition, Honeywell Connected Enterprise drove double-digit connected software growth, continuing our transformation into a premier software industrial company."

Segment details

Revenue for the aerospace segment plunged 12% to $3.54 billion in the third quarter. However, sales on an organic basis jumped 10% due to robust growth in business aviation original equipment and double-digit growth in the defense and space business. The segment's margin climbed 350 basis points to 25.6%, which was mainly driven by a positive impact from the spinoff of the Transportation Systems business in 2018.

Sales at Honeywell Business Technology tumbled 44% to $1.42 billion. Organic revenue, though, increased 3% due to strong performance of commercial fire and building management products. As a result of the spinoff of the Homes and ADI Global Distribution business in 2018, the segment's margin soared 390 basis points to 21%.

In the Performance Materials and Technologies segment, revenue grew 1% to $2.67 billion. Organic sales were up 3%, while the segment's margin improved 60 basis points to 21.8%.

Safety and productivity solutions sales amounted to $1.46 billion in the reported quarter, which reflected a decline of 7% year over year. Organic sales fell 8% due to poor sales of productivity products, which was partially offset by demand for gas sensing and detection products. Margins fell 320 basis points to 13.4%.

Financial forecast

Looking forward, Honeywell anticipates commercial aerospace demand to grow rapidly, thereby aiding its overall revenue. The company also expects earnings growth in the coming quarters because of operational excellence and stock buybacks.

For full-year 2019, the company has guided for earnings to range from $8.10 to $8.15 per share as compared to its previous forecast of $7.95 to $8.15. Revenue is expected to range from $36.7 billion to $37.9 billion.

Disclosure: I do not hold any positions in the stocks mentioned.

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This article first appeared on GuruFocus.