Honeywell’s Performance Materials and Technologies segment in 1Q17

Honeywell’s (HON) Performance Materials and Technologies (or PMT) segment is HON’s third-largest revenue contributor. It accounted for a revenue share of 21.8% in 1Q17. The segment reported revenue of $2.1 billion in 1Q17, a 9.3% fall YoY (year-over-year).

How Honeywell’s PMT Segment Performed in 1Q17

HON’s PMT segment was adversely impacted by the divestiture and spin-off of its resins and chemicals business. However, the demand for UOP modular gas witnessed growth due to strong orders. The licensing revenue fell during the quarter.

Net income and margin

The PMT segment reported a net income of $471 million in 1Q17 as compared to $461 million in 1Q16, an increase of 2% on a year-over-year basis. However, the segment’s margin improved from 20.2% in 1Q16 to 22.8% in 1Q17, an increase of 260 basis points on a year-over-year basis. The segment’s margin improved primarily due to the improved cost of goods sold from the previous year.

Segment’s outlook

The PMT segment in 2Q17 is expected to continue its decline due to effects from the divestiture and spin-off. However, the demand for UOP licensing and equipment is expected to continue.

Investors can indirectly hold Honeywell by investing in the PowerShares Aerospace & Defense Portfolio (PPA), which has invested 6.9% of its portfolio in Honeywell as of April 21, 2017. The top holdings of the fund include Lockheed Martin (LMT), United Technologies (UTX), and General Dynamics (GD), which each have weights of 7.0% as of April 24, 2017.

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

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