Weak markets expected to pull down Honeywell's 3Q

By STEPHEN SINGER

posted: 36 DAYS 6 HOURS AGO

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-Honeywell International Inc., which makes industrial products such as building materials, aircraft radar and fire safety equipment, is scheduled to report third-quarter earnings Friday before the market opens. The following is a summary of key developments and analyst opinion related to the period.

OVERVIEW: More than half of the Morristown, N.J., company's sales are overseas. As a result of its exposure, Honeywell has been hit hard by some of the economy's weakest sectors such as the aerospace, automotive and construction markets, which have been in a prolonged slump.

The company said when it released its second-quarter results in July it does not expect a recovery this year from the recession as customers such as airlines hold off on the purchase of Honeywell parts.

BY THE NUMBERS: For the third quarter, analysts polled by Thomson Reuters expect, on average, third-quarter earnings of 72 cents per share on revenue of $7.88 billion. That would be down from 97 cents per share on revenue of $9.28 billion in the third quarter of 2008.

ANALYST TAKE: Deutsche Bank analyst Nigel Coe said he expects a 15 percent decline in revenue year-over-year, bringing his estimate to the low end of $7.7 billion to $8.1 billion.

He reiterated a "Buy" rating of Honeywell shares recently, saying the company looks attractive in a V-shaped and L-shaped recovery.

However, per-share earnings will "almost certainly lag behind peers" due to pension funding problems of between 50 cents per share and 60 cents per share, he said in a client note.

Coe said revenue will be down in all segments, particularly Honeywell's transportation systems unit in which Honeywell makes products such as turbo chargers for car engines that are feeling the impact of the weak auto industry, specialty materials business that includes films, advanced fibers and composites, specialty chemicals and other materials, and its aerospace business, which also is under pressure because of weak markets.

Analyst Matt Collins of Edward Jones in St. Louis said in an interview that Honeywell, like other manufacturers such as United Technologies Corp. and Emerson Electric Co., have been in a "crisis mode for the past six months or so in cutting costs and it's clearly paid off."

However, the market is now beginning to price in a recovery in revenue, raising investors' expectations for rising sales, he said.

WHAT'S AHEAD: Honeywell said in July it expects 2009 earnings of $2.85 per share on revenue of $31.5 billion, at the low end of its previous guidance. Analysts foresee $2.78 per share on revenue of $31.46 billion.

STOCK PERFORMANCE: Shares of Honeywell rose 18 percent in the July-to-September period, better than the 14.5 percent increase for the Standard & Poor's 500 index.

2009-10-21 11:24:13