Honeywell Beats Profit and Sales Expectations, Raises 2018 Guidance
The U.S. industrial conglomerate said it expects to bring back at least $7 billion in cash it holds overseas during the next two years, taking advantage of the new law.
MORRIS PLAINS, N.J. — Honeywell (NYSE: HON) hit an all-time high Friday after reporting strong fourth quarter results. Shares of Honeywell rose as much as 1.2% in morning trading to hit a record of $163.85.
Honeywell revenue increased to $10.8 billion from $9.9 billion, beating the FactSet consensus of $10.7 billion, as better than expected sales in its aerospace, performance materials and technologies and safety and productivity solutions businesses offset a slight decline in home and building technologies sales.
For 2018, the company raised its earning per share (EPS) guidance by 20 cents to $7.75 from $8 to reflect a lower expected tax rate following the passage of tax-reform legislation. The company’s stock has rallied 37.2% during the past 12 months through Thursday.
Although the company reported a significant loss due to a $3.8 billion tax provision in the fourth quarter, its adjusted profit narrowly beat analysts’ estimates due to strength across all of its divisions. Honeywell also raised its 2018 earnings forecast and said it was seeing a greater level of confidence from its customers, who may now have more cash on hand to spend due to the new tax law.
“Their capex is our revenue, and we do expect some level of investment to accelerate [later in 2018],” CEO Darius Adamczyk said during an earnings call Friday.
During the conference call, Honeywell executives said the company expected to bring back at least $7 billion of the $10 billion in cash held overseas in the next two years, taking advantage of the newly enacted tax law.
Much of the growth in the business was driven by its commercial aviation aftermarket division as a rise in travel demand boosted sales of spare parts and services to the airline industry.
Honeywell is also benefiting from increased demand from oil and gas customers in the wake of stabilizing oil prices, while its business that makes supply chain and warehouse automation equipment and software is riding an e-commerce boom.
Home and Building Technologies Division
In October, Honeywell announced its intent to separately spin off its Homes product portfolio and ADI global distribution business, as well as its Transportation Systems business, into two standalone, publicly-traded companies.
During the conference call, the company said its Home and Building Technologies division experienced organic sales growth of 3% for the quarter. Instead of showing results from products and distribution, the company said it will begin reporting on results in the two new reorganized business units home and buildings, effective with the release of first quarter earnings.
Adamczyk said the Home and Building Technologies unit designed a state-of-the-art connected home solution and signed a long-term agreement with ADT to sell it exclusively through ADT’s direct and professional dealer network. The solution includes intrusion alarm, smoke detection, carbon monoxide (CO) detection, an innovative long-range battery, motion viewers, among other home controls features.
“We are excited to continue our long-term partnership with ADT providing our customers the most innovative products for their connected home,” he said.
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