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Why Wall Street Is Optimistic about Honeywell after 1Q17 Results

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Why Wall Street Is Optimistic about Honeywell after 1Q17 Results PART 1 OF 7

Honeywell’s 1Q17 Earnings Beat Estimates

Honeywell’s 1Q17 earnings

Honeywell (HON), the industrial conglomerate, announced its 1Q17 earnings on April 21, 2017. HON reported earnings per share (or EPS) of $1.71 in 1Q17, an increase of 9.6% over 1Q16. HON managed to beat Wall Street analyst consensus estimates of $1.62 per share by a long shot. In this series, we’ll look at HON’s earnings details, its segmental performance, and the latest analyst opinions on the stock.

Honeywell&#8217;s 1Q17 Earnings Beat Estimates

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What pushed HON’s earnings upwards?

Honeywell displayed good control over its cost of goods sold (or COGS). HON’s COGS fell from $6.5 billion in 1Q16 to $6.4 billion in 1Q17. As a percentage of sales, HON’s 1Q17 COGS represented 67% of its revenue, while in 1Q16, HON’s COGS represented 68.7%, a decline of 1.8 percentage points on a year-over-year basis. HON’s share repurchases also helped its earnings per share. During 1Q17, HON purchased 2,575,000 common shares at the cost of $310 million under HON’s $5 billion share repurchase program.

Stock price reaction

HON stock price reacted positively to close at $127.08. It rose approximately 2.7% after earnings beat estimates and the company raised its guidance. On the same day, General Electric (GE) stock price dropped 2.4%, while United Technologies (UTX) and Textron (TXT) rose 0.9% and 1.6%, respectively.

Honeywell raises low end of 2017 EPS

After reporting strong earnings, Honeywell raised the low end of its 2017 earnings per share. Now HON expects 2017 full-year EPS to be in the range of $6.90 to $7.10 as against the earlier guidance of $6.85 to $7.10.

Investors can indirectly hold Honeywell by investing in the iShares U.S. Industrials ETF (IYJ), which invests 3.4% of its portfolio in Honeywell as of April 24, 2017.

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