Shares of Honeywell Inc. (HON, Financial) tumbled over 3% in morning trading on Friday following the release of its fourth-quarter 2020 earnings results.
For the quarter ended December 2020, the Charlotte, North Carolina-based industrial giant reported net income of $1.379 billion, or $1.91 in earnings per share, compared with net income of $1.590 billion, or $2.16 in earnings per share, in the prior-year quarter. Adjusted earnings of $2.07 per share topped consensus estimates and was near the high end of management's guidance.
Company outperforms sales guidance, albeit down from prior year
Fourth-quarter 2020 net sales of $8.9 billion topped the consensus estimate of $8.4 billion, yet declined 6% from fourth-quarter 2019 sales, driven primarily by lower sales in Honeywell's Aerospace and Performance Materials and Technologies business segments.
Aerospace sales declined 19% on the back of low commercial aftermarket demand stemming from reduced flight hours. Management discussed during the earnings call that the low revenues in aerospace were primarily due to pandemic-related interruptions.
Shares decline on low revenue, amid market selloff
Shares of Honeywell traded at an intraday low of $194.55, down approximately 4% from Thursday's close of $202.84. The stock is significantly overvalued based on Friday's price-to-GF Value ratio of 1.5.
GuruFocus ranks Honeywell's profitability 7 out of 10 on the back of profit margins and returns outperforming over 85% of global competitors, yet weighed down by three-year revenue and earnings growth rates underperforming more than half of global industrial production companies.
Gurus with large holdings in Honeywell include Pioneer Investments (Trades, Portfolio) and Diamond Hill Capital (Trades, Portfolio).
Honeywell's stock decline comes as the Dow Jones Industrial Average tumbled more than 570 points to an intraday low of 29,974.73.
Stocks sold off as investors monitored heightened speculative trading in stocks like GameStop Inc. (GME, Financial) and Johnson & Johnson (JNJ, Financial) announcing that its single-dose coronavirus vaccine demonstrated just 66% effectiveness overall in preventing the Covid-19 virus. While the effectiveness rate is 72% in the U.S., the effectiveness rate in Latin America and South Africa is just 66% and 57%.
Disclosure: I am long Johnson & Johnson.
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