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Signage at the Honeywell Quantum Computer Lab in Broomfield, Colorado
David Williams / Bloomberg
Honeywell International
posted better-than-expected second-quarter earnings, while raising its full-year earnings forecast. It was not good enough to keep the stock from falling. Remember, investors always expect strong results.
Honeywell stock (ticker: HON) fell 1.8% to $ 228.61 after reporting earnings of $ 2.02 per share on $ 8.8 billion in sales. Wall Street was looking for $ 1.94 per share on sales of $ 8.6 billion.
Management raised its annual profit guidance from a midpoint of $ 7.88 per share to $ 8.03 per share. The 15-cent increase is larger than the 8-cent second-quarter profit. Investors like to see the forecast increase, and they really like the forecast to increase more than the current quarterly rate. This shows that the business environment is still improving.
Sales forecasts, for the full year 2021, have fallen from a midpoint of $ 34.4 billion to $ 34.9 billion.
The results are good news for Honeywell shareholders. This is also good news for all investors looking for evidence that the global economy continues to improve.
Overall, operating margins increased by almost 2 percentage points to over 20%. In the second quarter, aerospace sales increased 9% year-on-year. Energy-related sales increased 15% year-on-year. The company also increased sales in its commercial buildings business as well as in its productivity business. The quarter appears to check all the boxes.
“Our results were driven by revenue growth and expansion of margins in all four segments,” CEO Darius Adamczyk said in the company’s new statement. “We are particularly pleased to see a turnaround in several of our key end markets that have been hit hardest by the pandemic, with the commercial aerospace aftermarket and the [energy] activity returned to growth during the quarter.
The aerospace industry has been particularly affected by the Covid-19. Honeywell’s strong results bode well for the future results of other major aerospace suppliers such as
Raytheon Technologies
(RTX) and
General Electric
(TO GIVE).
Why the lukewarm reaction to the big gains? For one thing, Honeywell stock hit a new 52-week high on Thursday, just ahead of print. And a lukewarm reaction to a rhythm is actually quite common. In Friday’s report, the company has beaten earnings for 16 straight quarters, according to Bloomberg, but its shares have fallen six times.
This is not unusual, even for other companies. More than half of companies reporting quarterly profits “exceed” analysts’ estimates. But the average reaction to earnings reports is about a 0.5% drop. Investors are still waiting for good news.
For the year, Honeywell stock is up around 9%, slightly behind comparable respective gains of 16% and 14% respectively of the
S&P 500
and
Dow Jones Industrial Average.
The company will host a conference call at 8:30 a.m. Eastern Time to discuss the results. Investors, happy with the current quarter, will want to know more about the sustainability of the global economic recovery.
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