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What Investors Can Expect from Honeywell's 2Q17 Results

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Part 3
What Investors Can Expect from Honeywell's 2Q17 Results PART 3 OF 5

Analysts Are Optimistic and Expect Honeywell’s EPS to Grow in 2Q17

Honeywell’s 2Q17 EPS estimates

On July 13, 2017, analysts expected Honeywell (HON) to post EPS (earnings per share) of $1.78 in 2Q17, implying an increase of 7.2% on a year-over-year basis. In 2Q16, HON reported earnings per share of $1.66.

Analysts Are Optimistic and Expect Honeywell&#8217;s EPS to Grow in 2Q17

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The expected growth in Honeywell’s (HON) earnings per share is expected to be driven by its improved operating expenses. Analysts expect Honeywell’s 2Q17 cost of goods sold (or COGS) to be ~$6.6 billion, representing 66.9% of its expected revenues. In 2Q16, HON’s COGS stood at ~68.3% of the revenues, implying a gain of 135 basis points.

Similarly, analysts expect Honeywell’s SG&A (selling, general, and administrative) expenses to fall in 2Q17 to ~$1.3 billion, representing 13.0% of the company’s expected sales. In 2Q16, HON’s SG&A expenses stood at ~$1.3 billion, representing 13.3% of the sale—an improvement of 30 basis points on a year-over-year basis.

Share buybacks

Companies often repurchase their common shares to improve their EPS. In 1Q17, Honeywell bought back $310 million of outstanding shares. On March 31, 2017, HON was left with $3.8 billion for the future repurchases of its common shares. In 2016, HON authorized a $5 billion repurchase program.

On March 31, 2017, HON had 773.9 million outstanding shares. For 2Q17, analysts are expecting the number of outstanding shares to fall by ~2.4 million shares, leaving the number of outstanding shares at ~771.5 million.

Investors can indirectly hold HON by investing in the Industrial Select Sector SPDR ETF (XLI), which invests 4.8% of its portfolio in HON. The top holdings of the fund include General Electric (GE), 3M (MMM), and Boeing (BA), with respective weights of 7.6%, 5.7%, and 5.3% on July 13, 2017.

In the next part, we’ll look into analysts’ latest recommendations for Honeywell.

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