Shrugging off concerns related to the ongoing trade war being waged by the Trump administration, shares of industrial conglomerate Honeywell International Inc. (HON, Financial) rose after the company reported solid second-quarter earnings before the bell on Friday morning and raised its guidance for the third time this year.
The New Jersey-based company, whose highly engineered products range from thermostats to jet engines, posted adjusted earnings of $2.12 per share, topping Thomson Reuters’ estimates of $2.01. Net income, however, fell to $1.27 billion, or $1.68 per share, from $1.39 billion, or $1.80 per share, a year ago as a result of costs related to the spinoff of its home heating and security business, which was announced last October.
Revenue grew 8.2% from the prior-year quarter to $10.92 billion, beating expectations of $10.8 billion.
Honeywell attributed its performance to strong sales growth across its business segments. The company is benefiting from an increase in global travel, while also seeing robust demand from the defense industry. In the aerospace division, its biggest segment, sales rose 10% to $4.06 billion and margins expanded 30 basis points to 22.6%.
In addition, the safety and productivity solutions business posted a 13% increase in sales to $1.6 billion. Sales in both the home and building, and performance materials and technologies segments grew 5%.
The company also reported that it generated approximately $1.7 billion in free cash flow, a 42% improvement.
In a statement, Chairman and CEO Darius Adamczyk lauded the company’s performance, highlighting its “continued top-line growth, strong margin expansion and double-digit earnings per share and free cash flow growth.”
“Given our strong second-quarter performance and confident outlook, we are raising our 2018 guidance,” he added.
For the year, Honeywell now expects revenue between $43.1 billion and $43.6 billion, segment margin expansion of 40 to 60 basis points, earnings between $8.05 and $8.15 per share and $5.6 billion to $6.2 billion in free cash flow.
Adamczyk also mentioned some future changes to the company’s structure.
“The portfolio transformation activities we announced last year are nearly complete, with the spin of our Transportation Systems business, Garrett, expected to be complete by the end of the third quarter, and the spin of our Homes business on track for completion by the end of the year,” he said.
Despite these changes, Honeywell remains a leader in the industrial products industry, behind 3M Co. (MMM, Financial) and General Electric Co. (GE, Financial).
Following the announcement, Honeywell shares shot up 3.31% in Friday morning trading to $152.55. According to GuruFocus, the stock has fallen 2% year to date.
Of the gurus invested in Honeywell, PRIMECAP Management (Trades, Portfolio) has the largest position with 0.41% of outstanding shares. Other guru shareholders include Mairs and Power (Trades, Portfolio), Mario Gabelli (Trades, Portfolio), Pioneer Investments (Trades, Portfolio), Jeremy Grantham (Trades, Portfolio), Barrow, Hanley, Mewhinney & Strauss and Steven Cohen (Trades, Portfolio).
Disclosure: No positions.
