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Honeywell Stock Soars on Strong 4Q17 Earnings

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Honeywell’s 4Q17 earnings

Honeywell International (HON) announced its 4Q17 earnings on January 26, 2018, before the market opened. It reported adjusted EPS (earnings per share) of $1.85, an increase of 6.3% YoY (year-over-year). The company managed to beat analysts’ EPS estimate of $1.84. In this series, we’ll look at Honeywell’s earnings, revenue, and segment-wise performance.

The adjusted EPS exclude a $3.8 billion charge related to the Tax Cuts and Jobs Act and ~$260 million in restructuring and other items. Honeywell’s 4Q17 earnings were primarily driven by higher organic revenue growth, of 6%. Operating costs, which mainly comprise costs of goods and services sold and SG&A (selling, general, and administrative) expenses, remained more or less unchanged as a percentage of sales. However, Honeywell’s share buybacks improved its EPS. Honeywell bought back shares worth $1.6 billion in 4Q17. At the end of 4Q17, Honeywell’s common outstanding shares stood at 758.8 million, compared with 772.3 million in 4Q16.

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Stock price reaction

Honeywell stock reacted positively to the earnings report, rising ~1.90% on January 26, 2018. That day, industrial peer General Electric (GE) fell 0.30%, while United Technologies (UTX) and Textron (TXT) rose 0.17% and 0.54%, respectively.

EPS guidance

Honeywell has revised its fiscal 2018 EPS guidance upwardly, to $7.75–$8 from $7.55–$7.80. The increase was primarily due to the effective tax rate potentially being reduced to 22%–23%.

For indirect exposure to Honeywell, investors could consider the PowerShares Aerospace & Defense ETF (PPA), which had invested 6.7% of its portfolio in Honeywell as of January 26, 2018. In the next part, we’ll look at Honeywell’s revenue in detail.

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