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How Honeywell’s Home & Building Technologies Did in Q2 2018

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Home & Building Technologies in Q2 2018

Honeywell International’s (HON) HBT (Home & Building Technologies) segment is its third-largest revenue contributor. In Q2 2018, the segment’s contribution shrank by 0.80 percentage points YoY (year-over-year) to 23.3% of the company’s total revenue. However, its revenue rose ~5.5% YoY to $2.54 billion from $2.41 billion.

The segment’s residential thermal and thermostat, commercial fire and software, and ADI Global Distribution businesses were its primary revenue growth drivers. Higher volumes and foreign currency exchange also boosted the segment’s revenue growth. Home sales rose 9%, while building product sales rose 2%.

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Net income and margins

In Q2 2018, the HBT segment’s net income rose 9.2% YoY to $427.0 million from $391.0 million. Restructuring, higher sales volumes, commercial strength, and foreign currency translation boosted the segment’s profit and expanded its margin by 60 basis points YoY to 16.8% from 16.2%.

Outlook

HBT revenue is expected to continue to grow due to strong commercial fire and software demand, supported by growth in the home product and ADI businesses. The segment’s margin could continue to expand. However, a strong US dollar could impact the segment’s revenue and margin.

Investors seeking indirect exposure to Honeywell could consider the iShares US Industrials ETF (IYJ), which has invested 3.3% of its portfolio in Honeywell. The fund also provided 3.2%, 2.4%, and 1.3% exposure to Union Pacific (UNP), Caterpillar (CAT), and Deere (DE), respectively, as of July 20.

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