What Can We Expect From Honeywell’s Q1 Earnings?

Honeywell International is all set to report earnings for the first quarter of FY 2017 on 21 April. The company performed quite solidly in the last quarter, only falling short in the final quarter on the back of weak performance at Aerospace. In the last quarter, organic growth at the conglomerate was down 1% year over year after the spin-off of Resins and Chemicals in Performance Materials and Technologies and the divestiture of the Aerospace government services business. However, the decline was partially offset by the acquisitions of Elster and Intelligrated.

In general, sales over the second half of the year were lighter than expected. This forced Honeywell to lower its overall revenue outlook for 2017 by almost 1.5% at the midpoint of its guidance range. Despite this, for the full year, Honeywell expects its earnings to lie in the range of $6.85-$7.10 per share, significantly up in comparison to $6.46 in 2016. For the first quarter, earnings are projected to be in the range of $1.60-$1.64 per share.

Probable Highlights:

• Earlier in the quarter, the company announced that it has been selected to provide a wide range of process technology for the Largest Petrochemicals Project in China. According to the deal, Honeywell UOP will offer a wide range of technologies to the project in the form of licensing, designing, key equipment, and state-of-the-art catalysts. Additionally, the Process Solutions segment will provide the process controls and automation systems. This deal is likely to have a significant impact on the company’s revenues as early as this quarter.
• Last month, Honeywell announced that its UOP’s Ecofining process technology will be utilized by the Diamond Green Diesel facility in Norco, LA. This implementation will enable the plant to increase its renewable diesel production capacity from 10,000 barrels per day to 18,000 barrels by the second quarter of 2018. We can expect to hear more on this deal on the call.
• The positives aside, Honeywell’s top line is going to be hurt by many macro conditions in the coming quarters. Due to its international presence, the company is often impacted adversely by unfavorable foreign currency movements. Any global slowdown, particularly after the whole Brexit fiasco, could hurt the business and hamper its long-term growth potential. Any conflicts or geopolitical disruptions could further affect its international operations in key markets.

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