Honeywell Reports Rising Profits Amid Cost Reductions

Honeywell posted a 24.9% rise in quarterly profit, helped by lower costs.

Honeywell Int’l (NYSE: HON) posted profit that matched analysts’ estimates as aerospace sales increased, bolstered by deliveries of jet engines, and overall margins expanded amid cost cuts.

Earnings excluding pension adjustments increased to $1.58 a share, the maker of thermostats and factory-automation software said in a statement Friday. Sales, hurt by lower demand for oil-and-gas equipment and services, fell 2.8% to $9.98 billion. Analysts had anticipated $9.99 billion.

Honeywell, like most U.S. industrial companies, has struggled as a strong dollar and slowing factory demand have hurt sales, Bloomberg reported. CEO Dave Cote has cut costs and improved efficiency to boost profit.

“We are planning conservatively in 2016 as we are expecting another year of slow global economic growth. But, we remain confident in Honeywell’s ability to outperform. We will support growth where there are opportunities to drive outperformance, be cautious in our sales planning, plan costs and spending conservatively, and continue to support the seed planting for new products, services, geographies, and process improvements that allow us to perform well now and in the future,” Cote said in a quarterly earnings release statement.

Among the earnings report, the company posted the following related to the security, life-safety and building automation sectors:

Sales for the fourth quarter were flat on a core organic basis and down (3%) reported driven by the unfavorable impact of foreign currency.  Energy, Safety & Security (ESS) sales decreased (1%) on a core organic basis (down 3% reported) driven primarily by a difficult prior year comparison in Sensing & Productivity Solutions (S&PS), partially offset by continued growth in Security and Fire (HSF) on a global basis.  Building Solutions & Distribution (BSD) sales increased 3% on a core organic basis (down 3% reported) driven by continued strength in Americas Distribution partially offset by slowing Building Solutions backlog conversion.

Aerospace was the bright spot for Honeywell during the quarter with sales rising 3.7% to $3.98 billion. Revenue dropped 12% at Performance Materials and Technologies, which sells equipment and services to the oil and gas industry, and decreased 3.3% for the Automation and Control Solutions unit.

Profit margins at the business units increased to 18.8% from 15.9% a year earlier. Sales excluding acquisitions and foreign currency were unchanged.

Honeywell reiterated a 2016 earnings forecast of $6.45 to $6.70 a share on sales of $39.9 billion to $40.9 billion. The $5.1 billion acquisition of Elster, which closed at the end of December, will add about $1.8 billion of sales each year, Honeywell has said.

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