Honeywell’s Q3 Adjusted EPS Beat Estimates, Stock in the Red



Honeywell beats analysts’ Q3 2018 earnings estimate

Honeywell International (HON) announced its third quarter of 2018 earnings on October 19 before the market opened. It reported adjusted EPS of $2.03, implying a 16.7% growth year-over-year. It beat Wall Street’s expectation of $1.99.

In this series, we’ll look at Honeywell’s earnings, revenue, and segment performances.

Honeywell’s higher revenue, better control over operating expenses as a percentage of sales, robust share buybacks, and lower effective tax rates boosted its adjusted EPS in the third quarter. Higher sales volumes were seen in the Aerospace segment. Its SG&A (selling, general, and administrative) expenses remained constant in dollar terms. However, as a percentage of sales, its SG&A expenses were ~14.2% of sales compared to 15.1% in the same quarter last year. That implies a contraction of 90 basis points year-over-year.

Honeywell bought back $2.3 billion in share repurchases. At the end of the third quarter, its outstanding shares were 752 million compared to 771 million in Q3 2017. Its effective tax rate was 21.9% compared to 23.4% in Q3 2017.

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Stock price reaction and guidance

On the day of its earnings release, HON stock fell 1.1%. The main reason for the decline was due to the announcement of the SEC’s (U.S. Securities Exchange Commission) investigation into HON’s accounting for asbestos-related liabilities. HON’s industrial peer General Electric (GE) rose 1.5%. 3M (MMM) and Stanley Black & Decker (SWK) fell 0.25% and 2%, respectively.

In its guidance, HON now expects its adjusted EPS for 2018 to be $7.95–$8. It reduced it from $8.05–$8.15 due to the spin-off.

Investors can indirectly hold Honeywell through the PowerShares Aerospace & Defense ETF (PPA), which has invested 7% of its portfolio in Honeywell as of October 19.


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