Honeywell International Inc. (HON:US), a maker of flight controls and thermostats, rose the most in more than three years after reporting quarterly profit that beat analysts’ estimates, driven by commercial aerospace sales.
The shares advanced (HON:US) 6.7 percent to $58.18 at the close in New York, the biggest gain since April 2, 2009. Honeywell has increased 7 percent this year.
Honeywell, which sells airplane parts from navigational systems to brakes, is benefiting from an increase in aircraft production as Boeing Co. (BA:US), Airbus SAS and other planemakers seek to whittle down large backlogs of orders. Sales at Honeywell’s aerospace division, its second-largest, advanced 7.7 percent to $3.03 billion in the second quarter.
“We continue to see good growth in the commercial businesses partially offset by manageable declines in defense,” David Anderson, Honeywell’s chief financial officer, said on a conference call today. “We saw the benefits of growth in both Boeing and Airbus deliveries resulting from the ongoing ramp in production rates.”
Net income in the second quater rose 11 percent to $902 million, or $1.14 a share, from $810 million, or $1.02, a year earlier, the Morris Township, New Jersey-based company said today in a statement. Analysts projected $1.11, the average of 20 estimates (HON:US) compiled by Bloomberg. Revenue rose 3.8 percent to $9.44 billion.
Profit margin expanded to 15.8 percent from 14.3 percent a year earlier amid gains at the aerospace division and performance materials unit, which sells equipment and chemicals to the energy industry.
“The quality of the upside was encouraging,” Jeff Sprague, an analyst with Vertical Research Partners in New York, said in a telephone interview. “The margins were better than expected in three of the four business segments and in line on the fourth.”
Automation & Control Solutions, Honeywell’s largest unit, had second-quarter sales of $3.96 billion, a 2.1 percent increase. The company’s transportation unit, which sells turbochargers to European carmakers, saw sales drop 9.1 percent to $900 million.
The company raised the low end of its annual profit forecast today, and now anticipates 2012 earnings per share to be $4.40 to $4.55 compared with $4.35 to $4.55 projected in April. Analysts projected $4.49, the average of estimates (HON:US) compiled by Bloomberg.
The full-year sales forecast was lowered by $200 million to $37.8 billion to $38.4 billion from $38 billion to $38.6 billion, according to the statement.
“Segment margins are expanding more than we initially expected at the beginning of the year despite slower sales growth,” Chief Executive Officer Dave Cote said on the conference call. “For 2012 and 2013, we have focused on margin expansion as key to earnings growth as a way to leverage slower sales growth in a tough macro environment.”
The company is preparing for a “tough economic landscape” next year with restructuring that will benefit the company by $150 million this year and more than $125 million next year, Cote said.
Earnings per share in the third quarter are expected to be $1.10 to $1.15 on sales of $9.4 billion to $9.6 billion, the company said in a slide presentation on its website.
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