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Earnings: How Does Honeywell Compare with Aerospace Competitors?

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Honeywell declares 1Q16 earnings

Honeywell (HON), a diversified, century-old industrial conglomerate, released its earnings report for the first quarter of 2016. The stock fell 0.65% on the day earnings were declared. In our pre-earnings release series and our overview of the company, we reviewed various aspects of Honeywell’s business and performance leading up to the quarter. Various aspects of its 1Q16 quarterly performance will be presented in detail in part two of this series.

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Honeywell’s earnings: Key points

Investors should note that Honeywell is integrating eight acquisitions this year. The weighted average margin rate for these acquisitions in the first quarter was 10%, which diluted the company’s portfolio. The company expects to start seeing margin expansion as it utilizes close to $300 million in unspent restructuring funds. These restructuring exercises are likely to bring the operational characteristics of some of the acquired businesses in line with the margins Honeywell is generally known for.

Quarterly performance among competitors

General Electric, Honeywell’s major competitor in the aerospace (ITA) and industrial (RGI) space, also declared its earnings on April 22. General Electric’s (GE) stock fell 0.74% after it posted earnings of 21 cents a share and beat street estimates by 3 cents. The company legitimized concerns about its oil equipment sales as it lowered guidance for the segment in fiscal 2016 but maintained its full-year 2016 target based on expectations of an upturn in power generation products in the second half of the year.

Rockwell Collins’s (COL) shares fell 5.1% after the company posted earnings of $1.28 a share and beat estimates by 2 cents. Contrary to Honeywell, COL reported weak demand in its aftermarket sales. The aftermarket weakness, along with lower business jet production and margin pressure, led to a 2% decline in the company’s operating profits. Peer United Technologies (UTX) is scheduled to declare its 1Q16 earnings on April 27.

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