Honeywell Forecasts First-Quarter Profit Below Estimates
January 27, 2012, 4:31 PM ESTBy Thomas Black
(Updates with closing share price in fifth paragraph.)
Jan. 27 (Bloomberg) -- Honeywell International Inc., the maker of turbochargers, digital flight controls and hardhats, predicted first-quarter profit that trailed analysts’ estimates as the global economy weakens.
Earnings will rise as much as 11 percent to 93 cents to 98 cents a share, the Morris Township, New Jersey-based company said today. Analysts anticipated $1, the average of predictions compiled by Bloomberg. Last quarter, profit beat estimates by 1 cent a share amid higher commercial-aerospace equipment sales.
Demand for Honeywell’s products is being hurt by a slowing economy, especially in Europe, where the sovereign-debt crisis is weighing on the sales of industrial companies such as General Electric Co. and United Technologies Corp. The World Bank cut its global-growth forecast this month, saying a recession in the euro region may exacerbate a slowdown in emerging markets.
“While we expect a more challenging macro environment ahead in 2012, primarily driven by softness in Europe impacting the short-cycle businesses, we’re confident that Honeywell is well positioned to continue to outperform,” Honeywell Chief Executive Officer Dave Cote said in a statement today.
Honeywell’s shares rose 0.8 percent to $58.27 at the close in New York. The stock has gained 4.2 percent in the past 12 months.
Fourth-Quarter Loss
The company anticipates sales of $9 billion to $9.2 billion for the first quarter, compared with the $9.23 billion average prediction.
Honeywell reaffirmed its prior forecast of $4.25 to $4.50 per share for 2012 and anticipates being on “high side” of that range, aided by sales growth that excludes acquisitions and without counting on a turnaround in the European economy, Cote said on a conference call with analysts.
“We feel that given the end markets we are in, we can outperform our peers in any economic conditions because we think we’ve done all the work we need to, to have great positions in good industries,” Cote said.
Excluding pension expenses, fourth-quarter profit was $1.05. Analysts anticipated $1.04. Including the pension-fund costs, Honeywell posted a net loss of $310 million, or 40 cents a share, compared with profit a year ago of $369 million, or 47 cents, a year earlier, according to the statement.
Sales rose 8.3 percent to $9.47 billion in the quarter, below the average prediction of $9.56 billion. Sales excluding acquisitions, known as organic sales, rose 7 percent from a year ago.
Strong Dollar
During the quarter, sales were hurt by a stronger dollar and lower commodity prices in the specialty-materials unit. The drop in costs causes sales to decline, without hurting margins, because the savings are passed on to customers, Chief Financial Officer David Anderson said in an interview.
Aerospace sales advanced 8 percent as a 20 percent increase in commercial offset lower demand for military-equipment and services. Automation and Control Solutions rose 4 percent after additional sales from acquisitions were weighed down by foreign currency impacts. Sales jumped 24 percent at the Performance Materials and Technologies unit and rose 10 percent at transportation systems.
“This was another good operating quarter from Honeywell, which we think had been largely expected by investors,” Robert Stallard, an analyst with RBC Capital Markets, said in a report today. “To us, the growth in aerospace and the operating margin are the stand out items.” He rates the shares “outperform.”
Earlier this month, Honeywell said it will build a turbocharger plant in Wuhan, China, that will begin production at the end of this year. In November, the company announced the $338 million acquisition of King’s Safetywear Ltd., a Singapore- based maker of work boots.
--Editors: Niamh Ring, James Callan
To contact the reporter on this story: Thomas Black in Dallas at tblack@bloomberg.net
To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net
