Honeywell International Inc. (HON) reported fourth quarter 2009 earnings from continuing operations of 91 cents per share, exceeding the Zacks Consensus Estimate of 90 cents. Fourth quarter sales were $8.1 billion versus $8.7 billion in 2008.
Segment Details
Aerospace sales were down 18% compared with the fourth quarter of 2008, primarily due to lower volumes in the commercial aerospace aftermarket, original equipment sales to Business and General Aviation and Defense sales. These were partially offset by higher original equipment sales to large air transports and logistics services. Segment profit was down 20% and segment margin decreased 60 bps to 18.6%, primarily due to volume declines, partially offset by cost savings initiatives and benefits from prior repositioning actions.
Automation and Control Solutions sales were down 4% compared with the fourth quarter of 2008, resulting from slower economic growth in the U.S. and Europe, partially offset by the favorable impact of foreign exchange, continued growth in emerging regions, and the net favorable impact from acquisitions and divestitures. Segment profit was up 5% and segment margins increased 130 bps to 14.7% driven by cost savings initiatives and benefits from prior repositioning actions, more than offsetting the unfavorable impact of lower volumes and inflation.
Transportation Systems sales were up 13% compared with the fourth quarter of 2008, due to higher volumes of turbochargers globally and the favorable impact of foreign exchange. Segment profit was up from $6 million to $72 million and segment margins increased 670 bps to 7.4% driven by cost savings initiatives, benefits from prior period restructuring actions, and higher volumes.
Specialty Materials sales were down 5% compared with the fourth quarter of 2008, resulting from lower volumes and the unfavorable impact of pass-through raw material price declines at our Resins and Chemicals business, partially offset by higher petrochemical catalyst sales and modest market recovery and inventory restocking within our Electronic Materials business. Segment profit was up 56% and segment margins increased 670 bps to 17.0% due to lower material costs, pricing initiatives, and cost savings initiatives.
Balance Sheet and Cash Flow
Total Cash and cash equivalents at the end of the quarter were $2.8 billion with long-term debt of $6.2 billion and shareowners’ equity of $8.9 billion. Free cash flow was $1.1 billion and cash flow from operations was $1.3 billion. Fourth quarter free cash flow was 154% of net income.
Guidance
Honeywell also reaffirmed its previously stated 2010 sales guidance of $31.3-32.2 billion, earnings per share of $2.20-2.40, and free cash flow of $2.4-2.7 billion.
Honeywell International Inc. operates as a diversified technology and manufacturing company worldwide. The company operates in four segments: Aerospace, Automation and Control Solutions, Specialty Materials, and Transportation Systems. Major competitors are Goodrich Corporation (GR) and United Technologies Corporation (UTX).
We currently have a Neutral recommendation on HON.
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