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Weak Industrial Demand a Cause for Honeywell Shares to Retreat

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Honeywell declares 2Q16 earnings

Honeywell (HON), a diversified, century-old industrial (XLI) conglomerate, released its earnings report for 2Q16 on July 22, 2016. The stock fell by 2.5% to $115.61 on the day as the company reduced its sales guidance and reported weaker sales in its Aerospace segment.

Various aspects of its 2Q16 quarterly performance will be presented in detail in this series.

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Honeywell’s earnings in 2Q16

Honeywell’s adjusted earnings per share (or EPS) rose by 9.9% year-over-year (or YoY) to $1.66 in 2Q16, topping Wall Street analysts’ consensus estimate $0.02. EPS rose on the back of 2% higher sales, a slight expansion in operating margins, and a lower share count.

The company’s weighted average number of shares outstanding fell by 2.5% YoY to 762.1 million, as it had repurchased shares worth $477 million at a price of $106 per share in the second quarter.

Quarterly performance among competitors

General Electric (GE), Honeywell’s major competitor in the aerospace (ITA) and industrial (RGI) sectors, also declared its earnings on July 22, 2016. General Electric’s stock fell by 1.6% after it posted EPS of $0.51, beating Wall Street’s estimate by $0.05.

The 16% fall in General Electric’s industrial orders is a key area of concern, especially when some of its purchases are capital intensive in nature and could weaken GE’s performance in the second half of the year if they’re pushed to 2017.

Rockwell Collins’s (COL) fiscal 3Q16 earnings and United Technologies’ (UTX) 2Q16 earnings are scheduled to be declared on July 25 and 26, respectively.

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