Slowdown In Manufacturing Expected To Weigh On Honeywell’s Earnings

by Trefis Team
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Honeywell (NYSE: HON) Honeywell has made a few key changes this year, mostly focused around becoming a less capital-intensive company. In previous quarters it spun off its Garrett Motion and Resideo businesses, and the effects of the spin-off are expected to start paying dividends this quarter. Furthermore, the company’s industrials segment is expected to perform well for the quarter. Fears about both a slowdown in manufacturing, as a result of the ISM (Institute for Supply Management) manufacturing index falling 5.2% for the quarter, and effects of the trade war are expected to weigh on earnings.

We have a price estimate of $156 per share for Honeywell. This price represents a 18% upside from current market levels. View our interactive dashboard for Honeywell Expectations Going Forward, and modify the key drivers to visualize the impact on Honeywell’s price.

Key Takeaways for Honeywell’s Fourth Quarter Pre-Earnings:

  • Consensus estimates put Honeywell’s earnings per share at 1.87 for the quarter. This would be a 2.2% decline yoy, on revenues of $9.7 billion. With yearly revenue estimates, at $41.7 billion.
  • Cost of Goods Sold is expected to fall by 100 basis points. This should help margins and may help earnings per share beat estimates.

Honeywell’s Performance Materials and Technology segment is the key sector to watch as the Process Solutions, and Advanced Material business see a cyclical upside. We also expect the software business to see a tailwind, as new businesses are onboarded. The Safety and Productivity business is also expected to see an upside, as the company’s Android business starts to take-off.

While earnings and revenue are expected to be muted, we believe that Honeywell should see some growth year over year, and there might be more upside than consensus estimates believe. With the bottom-line showing short term volatility, we believe metrics like EV/EBITDA show that the stock may not be very expensive. The stock remains down due to previously mentioned fears. A good quarterly result, could provide Honeywell some necessary tailwind.


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