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Honeywell’s Aerospace Revenue Flies High

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Apr. 23 2018, Updated 4:20 p.m. ET

Honeywell’s Aerospace segment in 1Q18

Honeywell International’s (HON) Aerospace segment is the company’s most significant revenue contributor. It accounted for 38.3% of the company’s 1Q18 revenue and 37.4% of its 1Q17 revenue, marking a gain of 0.9 percentage points YoY (year-over-year). In 1Q18, the segment’s revenue rose 12.1% YoY to $4.0 billion from $3.6 billion.

The Aerospace revenue increase was driven by growth in all of the segment’s businesses. The demand for air transport, regional, and business original equipment manufacturers boosted commercial original equipment sales by 14%, commercial aftermarket sales by 6%, defense and space sales by 14%, and transportation system sales by 18%.

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Net income and margins

In 1Q18, the Aerospace segment’s net income rose 12% YoY to $893.0 million from $796.0 million, driven by higher productivity, lower customer incentives, foreign exchange, and the adoption of new revenue recognition accounting standards. As a result, the Aerospace segment’s margin expanded by ten basis points YoY to 22.5%. 

Outlook

The Aerospace segment is expected to continue its organic growth, driven by new business deals for its GoDirect system. Higher revenue and productivity measures could improve its margins.

Investors seeking indirect exposure to Honeywell could consider the Vanguard Industrials ETF (VIS), which has invested 3.5% of its portfolio in Honeywell. The fund’s other holdings include Boeing (BA), 3M (MMM), and General Electric (GE), which had weights of 6.2%, 4.2%, and 4.2%, respectively, as of April 20.

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