Honeywell’s 2Q17 Earnings Beat Estimates: Stock Rises



Honeywell’s 2Q17 earnings

Honeywell International (HON) announced its 2Q17 earnings on July 21, 2017, before the market opened. Its EPS (earnings per share) came in at $1.80, a 5.9% rise over 2Q16 on a continuous operational basis. The company managed to beat analysts’ EPS estimate of $1.78. In this series, we’ll be looking in detail not only at HON’s earnings but also at its revenues and segment performances.

HON’s earnings growth was driven by a lower effective tax rate due to the increase in tax benefits for employee share-based payments and tax resolutions in some jurisdictions. Its effective tax rate for the quarter was 21.3% compared to 24.4% in 2Q16. Although HON’s cost of goods sold (or COGS) increased marginally, it declined as a percentage of sales. It reported COGS of $6.9 billion, representing 68.0% of sales. In 2Q16, COGS stood at $6.8 billion, representing 68.3% of sales. That implies a gain of 30 basis points.

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Stock price reaction

Honeywell stock reacted positively to the earnings release, rising 1.0% and closing at $136.35 on July 21. That same day, HON’s peers General Electric (GE) and Textron (TXT) fell 2.9% and 0.30%, respectively, and United Technologies (UTX) rose 0.80%.

Honeywell raises EPS guidance for fiscal 2017

Honeywell’s strong performance for two consecutive quarters has led management to raise the earnings forecast for the year. It raised its lower end of EPS by $0.10. Now HON expects EPS for fiscal 2017 to be $7–$7.10 against the previous guidance of $6.90–$7.10.

You can indirectly hold Honeywell by investing in the iShares US Industrials ETF (IYJ), which has invested 3.4% of its portfolio in Honeywell as of July 21, 2017.


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