Honeywell Rides Sales Momentum -- WSJ
July 21 2018 - 3:02AM
Dow Jones News
By Allison Prang
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (July 21, 2018).
Honeywell International Inc. raised its financial guidance for
the year as sales rose in its second quarter, showing the
industrial conglomerate continues to benefit from strong demand
from customers in aviation, defense and other segments.
Executives also played down any impact from tariffs and trade
concerns in the company's earnings call Friday morning, noting
Honeywell could have a leg up against competitors given its sources
outside of China.
Net sales at the New Jersey-based Honeywell rose 8.3% to $10.92
billion in the second quarter from the year-ago period. Honeywell
reported sales increases in all of its segments -- aerospace, home
and building technologies, performance materials and technologies
and safety and productivity solutions. Analysts polled by Thomson
Reuters were expecting net sales of $10.8 billion.
The company now expects annual organic sales growth of between
5% and 6%, up from its previous expectations of between 3% and 5%.
The latest period also marked Honeywell's sixth consecutive quarter
with year-over-year organic sales growth.
On an adjusted basis, Honeywell now expects to earn between
$8.05 and $8.15 a share for the year, up from its prior forecast of
between $7.85 and $8.05 a share. Free cash flow is expected to be
between $5.6 billion and $6.2 billion for the year, up from the
company's old guidance of between $5.3 billion and $5.9
billion.
"This is just a continuation of a very high quality story," said
Deane Dray, a managing director at RBC Capital Markets.
Mr. Dray said there is a lot of excitement around the company's
warehouse automation business, Honeywell Intelligrated. That
business -- which falls in the company's safety and productivity
solutions segment, where revenue rose 13% -- is working on a
warehouse for Amazon in Canada.
"You can't just casually mention Amazon," Mr. Dray said. "They
must have a really good relationship."
Shares of Honeywell rose nearly 4% in late-afternoon
trading.
Honeywell is also working to divest itself of some of its
businesses. The company expects to complete the spinoff of both its
home and transportation businesses by the end of the year.
Honeywell reported a second-quarter profit of $1.27 billion, or
$1.68 a share, down from the $1.39 billion, or $1.80 a share, in
the year-earlier period. Tax expenses rose 90% to $719 million,
which included some separation costs.
On an adjusted basis, which omits the $346 million in separation
costs, Honeywell reported earnings of $2.12 a share, up from $1.80
a share a year ago. Analysts polled by FactSet expected $2.01 a
share.
Even as Honeywell works to rid itself of some operations, Chief
Executive Darius Adamczyk, who has been CEO since 2017, in the past
has made known his interest in doing acquisitions. On the company's
call Friday, Chief Financial Officer Tom Szlosek said deals are how
the company would want to use its capital, but Honeywell will
continue doing share buybacks "in the absence of immediate
opportunities." Honeywell has repurchased about $1.7 billion of its
shares in the first half of this year.
Honeywell also on Friday addressed general tariff concerns, an
issue investors have had to parse through in recent weeks.
Executives were somewhat optimistic on Friday's call, with Greg
Lewis, the company's incoming CFO, saying Honeywell could have a
leg up because of where it sources its products.
"This is literally a weekly activity for us and probably the
single most important thing that we talk about in making sure that
we're proactive," Mr. Adamczyk said in response to an analyst's
question about pricing as it relates to tariff inflation.
Write to Allison Prang at allison.prang@wsj.com
(END) Dow Jones Newswires
July 21, 2018 02:47 ET (06:47 GMT)
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