Why Honeywell Will Likely Report An Earnings Miss For FY19

by Trefis Team
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As per Trefis estimates, Honeywell (NYSE: HON) will report earnings per share of around $7.93 for full-year 2019 compared to the consensus expectations of $8.14. The company will release its Q4 and full-year 2019 results on Friday, January 31. We believe that Honeywell’s revenues will beat the consensus, but the earnings won’t. Honeywell should report revenues of $37 billion (vs. consensus estimate of $36.8 billion), which would be 0.4% higher than the figure for the previous year. However, earnings are likely to be around $7.93 (vs. consensus estimate of $8.14) – down from $9.02 reported in 2018. We believe that negative revenue growth and weaker-than-expected earnings for FY 2019 will result in a slight reduction in Honeywell’s stock price once it announces earnings.  Our forecast indicates that Honeywell’s valuation is $180 a share, which is slightly below its current market price.

 

A] Honeywell’s Revenues expected to be slightly below consensus

  • Total Revenues have increased from $39.3 billion in 2016 to $41.8 billion in 2018.
  • Trefis estimates Honeywell’s revenues to decrease in 2019 due to the spin-off of its Turbo Chargers division (which was a part of the Aircraft and Automotive Components segment), as well as the spin-off of some businesses in the Safety and Security Products segment.

A separate interactive dashboard for Honeywell provides an in-depth view of Honeywell’s revenue trend and segment-wise revenue performance, along with forecast for 2019.

 

B] EPS To Be Higher Than Consensus

  • Honeywell’s 2019 earnings per share (EPS) is expected to be $7.93 per Trefis analysis, lower than the consensus estimate of $8.14 per share.
  • In 2019, a fall in revenues as detailed above will result in the EPS figure declining compared to the figure of $9.02 in the previous year despite a reduction in total expenses and lower share count.
  • As we forecast Honeywell’s Revenues to decline at a similar rate as Expenses in 2019 (both 12%), this will result in the Net Income Margin figure shrinking slightly from 16.4% in 2018 to 16.2% in 2019

 

C] Stock Price Estimate Is Around The Market Price

  • A trailing P/E multiple of 22.7x looks appropriate for Honeywell’s stock, which is a little higher than the current implied P/E multiple of 22.2x.
  • As per Trefis, Honeywell’s 2019 revenue will be higher than market expectations, while earnings are expected to be lower. This works out to a fair value of $180 for Honeywell’s stock, which is around the current market price.

Additionally, you can input your estimates for Honeywell’s key metrics in our interactive dashboard for Honeywell’s pre-earnings, and see how that will affect the company’s stock price.

 

See all Trefis Price Estimates and Download Trefis Data here

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