Honeywell International Inc. (HON, Financial) released second-quarter results before the opening bell on July 18. The company posted an earnings beat, but sales did not live up to analysts’ expectations.
By the numbers
The industrial conglomerate posted earnings of $2.10Â per share, which were up 9% from the prior-year quarter and also surpassed Wall Street’s estimates by 2 cents. Quarterly revenue declined 15% to $9.24 billion, which fell $9.35 billion short of analysts' predictions. The company cited spinoffs of some of its businesses in 2018 as the reason for the decline.
Selling, general and administrative expenses amounted to $1.38 billion, down 9.2% on a year-over-year basis. Interest and other financial costs stood at a combined $85 million.
At the end of the quarter, the company had cash and cash equivalents of $8.22 billion and long-term debts of $8.6 billion.
Segment details
Revenue for the aerospace segment plunged 14% to $3.5 billion. Organic sales, though, surged 11% on the back of robust growth in business aviation original equipment coupled with 20% organic growth in the U.S. and international defense and space business. The segment’s margin jumped 330 basis points to 25.9%, driven by high organic sales volumes and a positive impact from the spinoff of the Transportation Systems business in 2018.
Sales at Honeywell Business Technology decreased 43% to $1.45 billion. Organic sales inched up 5% on the back of strong performance of commercial fire products and building management software. Due to the spinoff of the Homes and ADI Global Distribution business in 2018, the segment’s margin grew 390 basis points to 23.5%.
Revenue in the performance materials and technologies division grew 1% in the reported quarter to $2.73 billion. Organic revenue improved 4% while the segment’s margin was up 140 basis points to 28.5%
Safety and productivity solutions sales totalled $1.55 billion, down 4%. Organic sales dropped 4% due to poor sales of productivity products, which was partially offset by demand for gas sensing and detection and intelligrated aftermarket and voice solutions growth. The margin declined 420 basis points to 12.3%.
Forecast
Looking ahead, the company expects commercial aerospace demand to grow rapidly, thereby aiding its overall revenue. Additionally, Honeywell says it bottom line can improve in the quarters ahead on the back of operational excellence, stock buybacks and corporate tax benefits.
The company has provided guidance for 2019. It projects earnings per share will be between $7.95 and $8.15. Revenue is estimated to range from $36.7 billion to $37.2 billion.
Disclosure: I do not hold any positions in the stocks mentioned.
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