The New Jersey-based Fortune 100 company, Honeywell International Inc. (HON, Financial) reported its first-quarter earnings for the fiscal year 2015 on April 17 and the earnings number surpassed the Street estimates though the revenue fell short of expectations. The company attributed the fall of revenue for the quarter to the major currency woes that slowed growth in its topline for the first three months of the fiscal year. Let’s dig a bit deeper to find out the major highlights of the first quarter earnings report of Honeywell.
The quarter recap
For the quarter that ended on March 31, Honeywell posted a profit of $1.12 billion, or $1.41 a share, from $1.02 billion, or $1.28 a share, reported in the same quarter last year. In fact, the earnings surpassed the analysts’ estimates that were hooked to $1.39 per share. The company had forecast first-quarter earnings to be in the range of $1.36-$1.41 a share and clearly such estimates were met as reflected through the actual numbers.
However, revenue took a straight dip due to currency woes as the dollar remained strong during the period. Revenue for the quarter saw a 5% decline from $9.679 billion reported a year ago, to $9.213 billion. Honeywell has indicated that its exposure to the euro has played a significant role in the slower-than-expected growth of topline during the quarter. Reported revenue missed the Thomson Reuters’ analyst estimates of $9.48 billion for the quarter. It is notable that, on a non-GAAP basis, the adjusted sales rose 1% in the quarter.
During the first three months of the current fiscal year, the company reported 2% organic sales growth which was chiefly driven by investment in new products and technologies. Operating margins were up by 340 basis points to 17.6% in the quarter, when compared on a year-over-year basis.
During the earnings presentation, CEO Dave Cote quoted, “Honeywell had a good start to 2015 delivering double-digit earnings growth at the high end of our guidance range and experiencing improving momentum over the course of the quarter.”
Despite solid earnings in the quarter, outlook remains cautious
The company expects the currency woes to continue into the near future. Hence it has lowered its revenue guidance for the full year to $39-$39.6 billion, from the prior range of $40.5-$41.1 billion. But, the company believes that by adopting brisk restructuring plans it would be able to deliver better earnings than its earlier expectations. Hence, it has improved its full year earnings guidance to a new range of $6-$6.15 per share, from $5.95-$6.15 per share. Operating income margin is now expected to be in the range of 17.4%-17.7% for the entire fiscal year from the earlier guidance of 16.7%-17%. The raised guidance on profit margin is being attributed to productivity gains net of inflation and higher volumes among other items.
The company aims at improving its footprint in the high-growth markets in the upcoming quarters of the year and intends to continue its investment in new products and technology. The management remains cautious, but optimistic on the near future and has mentioned that the balanced portfolio mix of short and long cycle businesses were well-positioned to deliver the set 2015 goals.
Last word
Though the sales of the company are under the impact of unfavorable currency translations, its earnings remain solid and with the rise in net income, the Honeywell stock also remains a solid performer. The shares of Honeywell were up more than 2% at $106.14 in pre-market trading last Friday. Investors surely have a lot more to witness in the upcoming quarters and hence they should hold on to their investments in the near future.
