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Honeywell’s Home and Building Technologies Segment in Q3 2018

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Home and Building Technologies in Q3 2018

Honeywell International’s (HON) HBT (Home and Building Technologies) segment is the company’s third-largest revenue contributor. In the third quarter of 2018, the segment’s contribution declined 1.1 percentage points YoY (year-over-year) to 23.4% of the company’s total revenue. The segment’s revenue increased ~1.5% YoY to $2.52 billion, from $2.48 billion.

The segment’s revenue growth was driven by the homes business due to continued growth in residential thermal solutions. Growth in the ADI global distribution business drove up revenue. But building revenue declined due to unfavorable foreign currency.

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Net income and margins

In Q2 2018, the HBT segment’s net income increased 2.1% YoY to $430 million, from $421 million. Restructuring and higher sales volumes helped the segment’s net income grow, while an unfavorable foreign currency translation had an adverse impact on its net income and margins. The segment’s net income margin expanded 10 basis points YoY to 17.1% from 17%.

Outlook

The segment will be impacted by the proposed spin-off that’s expected to be effective on October 30. Honeywell’s Homes product portfolio and the ADI global distribution business will become a separate company known as Resideo. Most likely, this segment will be removed from HON’s reporting segment going forward.

Investors seeking indirect exposure to Honeywell could consider the Invesco Dynamic Large Cap Value ETF (PWV), which has invested 3.3% of its portfolio in Honeywell. The fund also provides 3.3%, 3.2%, and 3.2% exposure to Goldman Sachs (GS), Morgan Stanley (MS), and Illinois Tool Works (ITW), respectively, as of October 19.

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