Honeywell International Inc (HON) reported first quarter of FY2010 earnings per share from continuing operations of 50 cents, exceeding the Zacks Consensus Estimate of 47 cents. First quarter 2010 revenues were up 3% to $7.8 billion versus $7.6 billion in 1Q2009.
Segment Details
Aerospace
Sales were down 9% compared with the first quarter of 2009, primarily due to lower original equipment sales to regional and business aviation customers and lower airline aftermarket sales, partially offset by growth in defense sales and logistics services. Segment profit was down 15% and segment margin decreased 120 basis points to 16.5%, primarily due to volume declines, partially offset by cost savings initiatives and benefits from prior repositioning actions.
Honeywell announced more than $190 million in contracts at the Singapore Air Show for avionics, maintenance, and auxiliary power unit selections with Asia Pacific regional airlines, including China Eastern, Air China, Qantas and Vietnam Airlines.
Automation and Control Solutions
Sales were up 4%, compared with the first quarter of 2009, primarily due to the positive impact of foreign exchange, continued growth in emerging regions, new product introductions, and general industrial recovery, partially offset by softness in commercial and residential end markets in developed regions. Segment profit was up 24% and segment margin increased 200 basis points to 12.4% driven by cost savings initiatives and benefits from prior repositioning actions, partially offset by inflation.
Transportation Systems
Sales were up 33% compared with the first quarter of 2009, due to higher volumes of turbochargers, friction materials, and consumer products globally and the favorable impact of foreign exchange. Segment profit was up approximately $100 million and segment margin increased 1,000 basis points to 9.6% driven by higher volumes, increased productivity, and benefits from prior restructuring actions.
Specialty Materials
Sales were up 8% compared with the first quarter of 2009, resulting from higher sales in our Resins and Chemicals, Electronic Materials, and Fluorine Products businesses due to improved global markets and the favorable impact of pass-through raw material price increases, partially offset by lower catalyst sales and project timing in our UOP business. Segment profit was up 36% and segment margin increased 300 basis points to 14.9% due to higher sales, commercial and plant effectiveness, and cost savings initiatives.
Guidance
The company expects 2010 sales of $31.5-32.3 billion and earnings in the range of $2.30-2.45 per share compared to the previous estimate of $2.20-2.40 per share.
Honeywell is a leading supplier of electronics, consumable hardware, engine controls, environmental controls, landing systems, power systems, propulsion engines, aerospace services and space products and systems for the aerospace industry, including commercial and regional airlines, air cargo carriers, as well as Original Equipment Manufacturers (OEMs) of commercial, regional, military aircraft and spacecraft.
Honeywell’s attractive collection of businesses has the potential to earn consistent above-average returns. The company’s focus on working capital management, free cash flow generation and balance sheet strength remain positive attributes in the current weak environment.
We currently have a Neutral recommendation on HON.
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