Honeywell International Inc. (NYSE:
HON), a technology and manufacturing company, is expected to post double-digit earnings growth for the fourth quarter to be led by its commercial aerospace business, margin expansion and its portfolio mix.
The company, as with other manufacturers in the U.S., has been posting solid earnings and sales growth amid a challenging economic environment through expansion in high-growth regions, acquisitions, new product pipeline and cost-control measures.
The Morris Township, New Jersey-based company manufactures cockpit electronics, auto products and control systems as well as chemicals and fire systems. The company operates in four business segments: aerospace, automation and control solutions, specialty materials and transportation systems. Its short-cycle businesses include: turbo technologies, advanced materials, and ACS products.
Honeywell had forecast continued margin growth for the future. Gross margin expanded in all four of the company's business segments in the third quarter led by rise in volumes at its commercial aerospace unit.
Expectations
HON is expected to report nearly a 20 percent rise in earnings per share to $1.04 for the fourth quarter from $0.87 a share in the same period of last year. Sales are projected to grow 5.7 percent to $9.5 billion.
For the full year 2011, the company expects pro-forma earnings of around $4.03 per share, on sales of $36.5 billion. Analysts' expect earnings of $4.04 per share on sales of $36.67 billion.
For 2012, HON sees earnings per share of $4.25 to $4.50, up 6 percent - 12 percent from 2011. It expects 4 percent to 7 percent growth in sales in the range of $37.8 billion to $38.9 billion.
Third Quarter Results
Honeywell's third-quarter earnings per share jumped 45 percent to $1.10, on 14 percent sales growth to $9.3 billion. In particular, the aerospace profit margin grew 120 basis points to 18.2 percent.
Earnings History
For the past four quarters, HON earned $1.10 per share, $1.02 per share, $0.88 per share and $0.87 a share, respectively. The company's earnings topped analysts' expectations in the three of four-quarter period. On the top-line side, the company recorded revenue of $9.3 billion, $9.0 billion, $8.6 billion and $9.0 billion for the third, second, first and last year's fourth quarter respectively.
Versus Peers
HON's gross margin for the trailing twelve-month period is behind the industry average, as well as its major peer United Technologies Corp. (NYSE: UTX). Its gross margin for the period was 24.41 percent versus industry average of 25.40 percent, and UTX's 27.87 percent. Operating margin stands at 10.37 percent compared to industry average of 10.27 percent and UTX's 15.02 percent.
Industrial conglomerate United Technologies reported on Wednesday fourth quarter EPS of $1.47 on net sales of $14.97 billion. The maker of Otis elevator, and Sikorsky aircraft affirmed its 2012 earnings per share forecast between $5.80 and $6.00.
Other major competitors of Honeywell are BorgWarner Inc. (BWA) and Johnson Controls Inc. (JCI).
Share Performance
In the past year, HON has been trading between $41.22 and $62.28. The stock closed at $58.10, up 0.72 percent on Jan 25, 2012.
iStock Punch
Though Honeywell has been posting earnings and sales upside, it may need to improve its margins amid a challenging economy. The company needs to ensure that it takes a conservative approach to maintain growth in margins over the near term. If the company's earnings and revenues come above expectations, there are chances that it will lift its 2012 forecast. On the other hand, if results fails to meet projections, then the company may cut its outlook.