Why Analysts Expect Honeywell’s Revenues to Fall in 2Q17



Honeywell’s revenue estimates

On July 13, 2017, analysts expected Honeywell (HON) to post revenues of ~$9.9 billion in 2Q17, a decrease of 1.1% over the previous year. In 2Q16, Honeywell reported revenues of ~$10.0 billion.

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Driving factors

Analysts are expecting Honeywell’s revenues to dip in 2Q17. The expected revenue decline is primarily due to:

  • the spin-off of AdvanSix (ASIX)
  • divestiture of Honeywell Technology Solutions, with annual revenues of $600 million, to KBR
  • continued weakness in its defense, business jets, and space operations

On the other hand, Honeywell could surprise by posting better-than-expected revenues, driven by the positive developments in its business. Honeywell completed the acquisition of Intelligrated in August 2016, which should contribute to HON’s revenues.

Intelligrated had reported ~$900 million in revenues. HON also acquired NextNine, a leader in industrial cybersecurity software. However, it might take some time to integrate its revenues with HON.

Inked deals

Honeywell signed an agreement with VietJet Air to supply 98 auxiliary power units (or APUs) to its fleet of 135 Airbus A320s. The deal was valued at $100 million, which includes maintenance services for 12 years. Further, Honeywell UOP made good progress during 2Q17, winning several new business deals that could boost the company’s overall revenues.

External factors like the weakness in the US dollar against the basket of currencies could boost HON’s revenues. The dollar index, which is a measurement of a basket of currencies, declined from 101.35 on April 1, 2017, to 95.62 on June 30, 2017, implying a decline of 4.7% in the span of three months. However, HON’s hedging policy determines whether it will make any gains.

Investors can indirectly hold Honeywell (HON) by investing in the PowerShares Aerospace & Defense Portfolio ETF (PPA), which invests 6.6% in HON. The top holdings of PPA include Boeing (BA) and Lockheed Martin (LMT), which had respective weights in the ETF of 6.9% and 6.8% on July 13, 2017.

In the next part, we’ll look into analysts’ expectations on HON’s earnings per share in 2Q17.


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