Honeywell’s 2Q17 Earnings Beat Estimates: Stock Rises

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.

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’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.