(HON) Honeywell International Beats as Sales Rise

Honeywell International Inc.’s (HON) reported fourth-quarter 2011 earnings results before the market opened today. Pro forma earnings per share were $1.05 in the reported quarter, above the Zacks Consensus Estimate of $1.04.

Mark-to-market pension expense in the quarter was $1.45 per share, including which the company incurred a loss per share of 40 cents.

For full year 2011, earnings per share from continuing operations were $4.05, above the Zacks Consensus Estimate of $4.03. Mark-to-market pension expense in the year was $1.44 per share, including which earnings per share were $2.61.

Total Revenue

Total revenue was $9.5 billion, an increase of 8% year over year. Organically, total revenue was up 7% year over year, led by strong performance in most of the markets. Geographical expansions and new product launches were contributing factors to the upside.

For full year 2011, sales amounted to $36.5 billion, an increase of 13% year over year.

The company reported a revenue increase in all its segments for the reported quarter.

Segment Performance

Aerospace segment sales climbed 8% year over year to $3.0 billion, led by increased Commercial original equipment sales and raised aftermarket volumes. This increase was partially offset by lower military and government services sales.

Automation and Control Solutions segment sales increased 4% year over year to $4.1 billion, led by new product launches, expansion in emerging markets and favorable macro trends.

Transportation System revenue of $944 million for the quarter, rose 10% year over year as a result of increased light vehicle Turbo volumes and new launches. This increase was partly masked by unfavorable foreign exchange impact.

Performance Materials and Technologies sales increased 25% during the quarter to $1.4 billion, led by good sales from UOP and development of catalysts and new product applications in Advanced Materials. The segment revenue was partially offset by inflation and unfavorable impact from acquisition of the phenol plant.


The company incurred total selling, general & administrative expense of approximately $1.6 billion in the quarter versus approximately $1.3 billion in the fourth quarter of 2010.

Aerospace operating margin expanded 40 bps to 18.8% during the quarter; Automation and Control Solutions climbed 130 bps to 14.4%; Transportation System increased 40 bps to 12.4% and Performance Materials and Technologies rose 80 bps to 15.6%.

Balance Sheet

Cash and cash equivalents were $3.7 billion with long-term debt of $6.9 billion and shareowners’ equity of $10.9 billion.

Free cash flow in the quarter was $1.4 million, excluding pension contributions of $250 million.

Moving Ahead

For further expansion, the company is focused on growth factors, such as investments in new products, technology demarcation, expansion in the emerging markets and initiatives in key processes. Honeywell’s short-cycle businesses as well as its commercial aerospace spares and residential and commercial retrofit businesses are performing impressively and are expected to support the company’s future growth outlook.

However, a change in the U.S. government’s defense and aerospace funding could adversely impact sales of Aerospace’s defense and space-related products and services.

Based in Morris Township, N.J., Honeywell International Inc. is a Fortune 100 company providing technical and manufacturing support to customers worldwide with aerospace products and services; control technologies for buildings, homes and industry; automotive products; turbochargers; and specialty materials. The major competitors of Honeywell are BorgWarner Inc. (BWA), United Technologies Corp. (UTX) and Johnson Controls Inc. (JCI).

We currently maintain our Outperform rating on Honeywell, corresponding with a Zacks #2 Rank (Buy recommendation) over the next one to three months.

BORG WARNER INC (BWA): Free Stock Analysis Report

HONEYWELL INTL (HON): Free Stock Analysis Report

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