Honeywell Stock Soars on Strong 4Q17 Earnings

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.

Honeywell Stock Soars on Strong 4Q17 Earnings

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.

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.