Honeywell’s revenue estimate
Honeywell (HON) is announcing its 4Q16 earnings on January 27, 2017. Analysts expect HON’s revenue in 4Q16 to increase on a year-over-year basis. As of January 20, 2017, analysts expect HON to post revenue of $10.15 billion in 4Q16, a growth of 1.7% year-over-year as compared with $9.98 billion in 4Q15. In the first three quarters of 2016, Honeywell managed to beat analysts’ estimates twice and looks like it is poised to repeat this performance in 4Q16 as well.
The expected growth in Honeywell’s revenue would be driven by the Home and Building Technologies segment. HON expects the segment to grow in the range of 15%–16% due to the positive impact of acquisitions, new product introductions, and higher growth in China and India. Similarly, HON’s Safety and Productivity Solutions segment is also expected to grow in the range of 15%–19%, primarily due to the favorable impact from the acquisition of Intelligrated.
On the other hand, the aerospace segment revenue is expected to decline in the range of 7% to 9% due to the continued weakness in the defense, business jets, and space businesses. Also, the spin-off of AdvanSix (ASIX) is expected to have an adverse impact on HON’s Performance Materials and Technologies segment’s revenue in the range of 4%–6%.
Another major concern is the strong dollar. Between October 1 and December 31, 2016, the dollar has appreciated 7.1% against the basket of currencies, which could have an unfavorable impact on HON’s revenues.
Investors can indirectly hold Honeywell by investing in the Industrial Select Sector SPDR Fund (XLI), which invests 4.5% of its holdings in Honeywell as of January 20, 2017. Other significant holdings of this fund include General Electric (GE), 3M (MMM), and Union Pacific (UNP), which have weights of 9.5%, 5.2%, and 4.6%, respectively, as of January 20, 2017.
In the next part, we’ll look into Honeywell’s earnings estimates ahead of its 4Q16 earnings release.