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Why Wall Street Is Optimistic about Honeywell after 1Q17 Results

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Part 4
Why Wall Street Is Optimistic about Honeywell after 1Q17 Results PART 4 OF 7

How HON’s Home and Building Technologies Revenue Trended in 1Q17

Honeywell’s Home and Building Technologies segment in 1Q17

Honeywell’s (HON) Home and Building Technologies (or HBT) segment is a new segment that began reporting in 3Q16. Honeywell realigned its Automation and Control System segment and split it into two segments:

  • Home and Building Technologies
  • Safety and Productivity Solutions

The HBT segment is HON’s second-largest revenue contributor, which accounted for a revenue share of 26.9% in 1Q17. The segment reported revenue of $2.6 billion in 1Q17, representing a 3% increase YoY (year-over-year).

How HON&#8217;s Home and Building Technologies Revenue Trended in 1Q17

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HON’s HBT segment’s strong performance was driven by the introduction of new products and an increase in home and building product sales volumes. On the other hand, foreign currency hedging adversely impacted the segment’s revenue.

Net income and margin

The HBT segment reported a net income of $389 million in 1Q17 as compared to $360 million in 1Q16, an increase of 8% on a year-over-year basis. The segment’s margin improved from 14.5% in 1Q16 to 15.2% in 1Q17, an increase of 70 basis point on a year-over-year basis. The segment’s margin improved primarily due to restructuring benefits.

Segment outlook

In 2Q17, the HBT segment is expected to remain flat. However, new product rollouts like the Elster smart meter and demand growth in China in the home and building distribution business could be positive surprises.

Investors can indirectly hold Honeywell by investing in the Vanguard Industrials ETF (VIS), which has invested 3.5% of its portfolio in Honeywell as of April 21, 2017. The top holdings of the fund include General Electric (GE), 3M (MMM), and Boeing (BA), which have weights of 10.1%, 4.4%, and 4%, respectively, as of April 24, 2017.

In the next part, we’ll look into the performance of the Safety and Productivity Solutions segment in 1Q17.

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